When an investor shorts a stock, they borrow the stock and sell it with the hope that they can buy it back at a lower price in the future.

In this case, the investor shorts 100 shares at $50 per share, so they receive $50 * 100 = $5,000 from the sale.

Six months later, the investor buys back the shares to close out the position. The share price has dropped to $43, so the cost to buy back the shares is $43 * 100 = $4,300.

So far, the investor has gained $5,000 - $4,300 = $700.

However, while the investor was short the stock, a dividend of $3 per share was paid. When an investor is short a stock, they are responsible for paying any dividends that are issued. So the investor must pay $3 * 100 = $300 for the dividend.

Therefore, the total gain for the investor is $700 - $300 = $400.

The correct answer is D. $400.

Question

When an investor shorts a stock, they borrow the stock and sell it with the hope that they can buy it back at a lower price in the future.

In this case, the investor shorts 100 shares at $50 per share, so they receive $50 * 100 = $5,000 from the sale.

Six months later, the investor buys back the shares to close out the position. The share price has dropped to $43, so the cost to buy back the shares is $43 * 100 = $4,300.

So far, the investor has gained $5,000 - $4,300 = $700.

However, while the investor was short the stock, a dividend of $3 per share was paid. When an investor is short a stock, they are responsible for paying any dividends that are issued. So the investor must pay $3 * 100 = $300 for the dividend.

Therefore, the total gain for the investor is $700 - $300 = $400.

The correct answer is D. $400.

Knowee AI · Accepted Answer

When an investor shorts a stock, they borrow the stock and sell it with the hope that they can buy it back at a lower price in the future.

In this case, the investor shorts 100 shares at $50 per share, so they receive $50 * 100 = $5,000 from the sale.

Six months later, the investor buys back the shares to close out the position. The share price has dropped to $43, so the cost to buy back the shares is $43 * 100 = $4,300.

So far, the investor has gained $5,000 - $4,300 = $700.

However, while the investor was short the stock, a dividend of $3 per share was paid. When an investor is short a stock, they are responsible for paying any dividends that are issued. So the investor must pay $3 * 100 = $300 for the dividend.

Therefore, the total gain for the investor is $700 - $300 = $400.

The correct answer is D. $400.

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.$700B.$1,000C.$300D.$400

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