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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?

Question

an investor shorts 100 shares when the share price is 50andclosesoutthepositionsixmonthslaterwhenthesharepriceis50 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?

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Solution

  1. First, calculate the amount the investor gains from the decrease in the share price. This is done by subtracting the final price from the initial price and then multiplying by the number of shares. In this case, it would be (50 - 43) * 100 = $700.

  2. Next, calculate the amount the investor loses from the dividend. This is done by multiplying the dividend per share by the number of shares. In this case, it would be 3 * 100 = $300.

  3. Finally, subtract the amount lost from the amount gained to find the total gain. In this case, it would be 700 - 300 = $400.

So, the investor gains $400.

This problem has been solved

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