Kensington Company stock was selling at $132 a share when Charlotte sold 300 shares of the stock short. Today Charlotte bought 300 shares of the same stock at a price of $140 per share to cover her position. Ignoring trading costs, what is the dollar return on Charlotte's investment?

Question

Quizplus · Accepted Answer

Charlotte sold the shares short at $132 each, receiving $39,600 (300 x $132). She then bought them back at $140 each, costing her $42,000 (300 x $140). The dollar return is the difference: $39,600 - $42,000 = -$2,400.

Kensington Company Stock Was Selling at $132 a Share When