Assume you sell short 1000 shares of common stock at $35 per share,with initial margin at 50%.What would be your rate of return if you repurchase the stock at $25/share? The stock paid no dividends during the period,and you did not remove any money from the account before making the offsetting transaction.

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The initial investment is $17,500 (50% of $35,000). The profit from the short sale is $10,000 (selling at $35,000 and buying back at $25,000). The rate of return is $10,000 profit divided by the $17,500 initial investment, which equals 57.14%.

Assume You Sell Short 1000 Shares of Common Stock at $35