Answer-first summary for fast verification
Answer: a) $39,500
### Calculation For a short sale: - Sell 1,000 shares at $380.00: **+ $380,000** - Buy back 1,000 shares at $333.00: **- $333,000** - Pay dividend of $6.00 per share: **- $6,000** - Borrowing fee: **- $1,500** \[ \text{Net profit} = 380{,}000 - 333{,}000 - 6{,}000 - 1{,}500 = 39{,}500 \] ### Answer **A) $39,500**
Author: Manit Arora
Ultimate access to all questions.
Question 716.1. In April 2017, Portfolio Manager Jeff believed that the shares of Chorizo Fast Casual Restaurants Incorporated ("Chorizo Inc"), trading at $380.00 per share, were over-valued. He instructed his broker to short 1,000 shares. In May, Chorizo Inc paid a dividend of $6.00 per share. In July, due to a food contamination incident, the shares plummeted to $333.00, when Jeff closed out his position. The total borrowing fee was $1,500.00. What was Jeff's net profit?
A
a) $39,500
B
b) $45,000
C
c) $47,000
D
d) $51,500
No comments yet.