Short-sale proceeds and collateral are credited

Assignment Help Financial Management

Reference no: EM13943032

You short-sell 500 shares of a stock for one year – i.e., you borrow and sell the shares at time t = 0, and you purchase and return the shares at time t = 1. At time t = 0, the ask and bid prices of the stock per share are 75.25 and 73.50, respectively. At time t = 1, the ask and bid prices of the stock per share are 70.75 and 69.25, respectively. The short-seller must put up an additional 5,000 of collateral. At time t = 0.25, the stock paid a dividend of 1.20 per share. Let the effective market annual interest rate be 6%, and the interest rate at which short-sale proceeds and collateral are credited is 2%. Determine the profit or loss of the short-seller during the year.

Reference no: EM13943032

Questions Cloud

If interest rates rise the current value of bond will rise : If interest rates rise, the current value of the bond will rise. If interest rates fall, the face amount of a bond will remain the same. An investor may anticipate that a callable bond may be called If interest rates have fallen.

The retirement fund : You started working at the age of 32 and thanks to your finance Professor you had religiously invested $300 per month into a fund which was earning 9% per year. You are currently 42 years old and suddenly retirement at age of 65 seems closer than eve..

Construct a story about a fictional korean : Creative and construct a story (300~500words) about a fictional (or non-fictional) Korean that is living undocumented in Los Angeles

Estimate the compression factor for music. : The CPU of a video server has a utilization of 65%. How many movies can it show using RMS scheduling?

Short-sale proceeds and collateral are credited : You short-sell 500 shares of a stock for one year – i.e., you borrow and sell the shares at time t = 0, and you purchase and return the shares at time t = 1. At time t = 0, the ask and bid prices of the stock per share are 75.25 and 73.50, respective..

Information and knowledge needs in an organisation : Write a business report illustrating how to assess information and knowledge needs in an organisation of your own choice.

Different types of storage devices are optimal : Convenience and quality of output are important. Explain what method of output would be best for each of the following situations and explain why

What will balance sheet look like after dividends are paid : The balance sheet for Intranet Browser Corp. is shown here in market value terms. There are 7500 shares of stock outstanding. The company has declared a dividend of £1.10 per share. what is the stock selling for today? What will the balance sheet loo..

Is there a favorable balance between benefit and harm : Write a potential hypothesis for this study and identify the variables (independent and dependent), Should the research study be stopped? Why or why not? Is there a favorable balance between benefit and harm

User Account

All Pages