An investor shorts 100 shares when the share price is $50 and closes out the position six months later when the share price is $43.The shares pay a dividend of $3 per share during the six months.How much does the investor gain?
A) $1,000
B) $400
C) $700
D) $300

Question

Quizplus · Accepted Answer

The investor gains $7 per share because he or she sells at $50 and buys at $43.However,the investor has to pay the $3 per share dividend.The net profit is therefore 7−3 or $4 per share.100 shares are involved.The total gain is therefore $400.

An Investor Shorts 100 Shares When the Share Price Is