Answer:
Value of the account = -$900
Explanation:
Accumulated profits from the short sale = Number of shares x Price per share
= 300 x $50 = $15,000
Commissions that are paid during the short sale = Commission per share x Number of shares
= 0.5 x 300 = $150
The Net proceeds from the short sale = Proceeds – Commissions
= 15000 – 150 = $14,850
Total dividend paid = Number of shares x Dividend per share
= 300 x 3 = $900
Money paid in covering the short sale = Number of shares x Price
= 300 x $49 = $14,700
Commissions paid in covering the short sale = Commission per share x Number of shares
= 0.5 x 300 = $150
Total money paid in covering the short sale
= 14700 + 150 = $14,850
Therefore, Value of the account = Proceeds – Dividend paid – Money paid
= $14,850 - $900 - $14,850 = -$900
Value of the account = -$900
Answer:
Value of the account on April 1 = $1000
Explanation:
Proceeds obtained from the short sale = Number of shares * Price per share = 400 * $63 = $25,200
Commissions paid during the short sale = Commission per share * Number of shares
= 0.5 * 400 = $200
Net proceeds from the short sale = Proceeds – Commissions = 25,200 – 200 = $25,000
Total dividend paid = Number of shares * Dividend per share = 400 * 1.5 = $600
Money paid in covering the short sale = Number of shares * Price = 400 * $58 = $23,200
Commissions paid in covering the short sale = Commission per share * Number of shares
= 0.5 * 400 = $200
Total money paid in covering the short sale = Money paid in covering the short sale + Commissions paid in covering the short sale
Total money paid in covering the short sale = 23,200 + 200 = $23,400
Value of the account = Net proceeds from the short sale – Dividend paid – Money paid
= $25,000 - $600 - $23,400 = -$1000
Value of the account = $1000
