On January 1, you sold short one round lot (that is, 100 shares) of Lowe's stock at $27.70 per share. On March 1, a dividend of

Question

2 months ago

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On January 1, you sold short one round lot (that is, 100 shares) of Lowe's stock at $27.70 per share. On March 1, a dividend of

$3.30 per share was paid. On April 1, you covered the short sale by buying the stock at a price of $22.00 per share. You paid 25 cents per share in commissions for each transaction.
a. What is the proceeds from the short sale (net of commission)?
b. What is the dividend payment?
c. What is the value of your account on April 1?

Business

1 answer:

Nady [3.6K] · Answer 1 · 2026-02-28T20:41:02+03:00

Explanation:

The summary of the calculations is detailed below:

a. The revenue generated from the short sale (after commission) is

= Number of shares sold short x (price at which sold short - commission per share)

= 100 shares x ($27.70 - 0.25)

= $2,745

b. The total dividend payment amounts to

= Number of shares × dividend per share

= 100 shares × $3.30

= $330

c. The account's value is

= Proceeds from short sale, after commission - dividend paid - total cost including commission

where,

Total cost including commission is

= Number of shares sold short x (buying price + commission per share)

= 100 shares × ($22 + 0.25)

= $2,225

Consequently, the account's value is

= $2,745 - $330 - $2,225

= $190