If an investor makes a short sale of Yahoo! stock and then the price of the stock decreases, the investor
A) loses money.
B) must repay the borrowed money.
C) makes money.
D) does not make or lose any money.
E) will sell the stock back.

Question

Quizplus · Accepted Answer

When an investor makes a short sale, they are borrowing shares from someone else and selling them in the hope that the price of the stock will decrease. If the price does decrease as expected, the investor can then buy back the shares at a lower price and return them to the lender, making a profit on the difference. Therefore, if the price of Yahoo! stock decreases, the investor would make money.

If an Investor Makes a Short Sale of Yahoo! Stock