Jennifer expects the price of a stock to decrease over the next month.Which one of the following strategies would allow Jennifer to earn a profit if the expected decrease actually occurs?

Question

Quizplus · Accepted Answer

Selling the stock short today would allow Jennifer to profit from an expected decrease in the stock price. When a stock is sold short, the investor borrows shares from a broker and sells them on the market with the hope of buying them back at a lower price in the future, thus making a profit. This strategy is effective when the investor expects the stock price to decrease. The other choices would not allow Jennifer to profit from the expected decrease in price.

Jennifer Expects the Price of a Stock to Decrease Over