You are bearish on Sienar Fleet Systems, you sold short one round lot (100 shares) at $85 per share. On March 1, a dividend of $2 per share was paid. On April 1, you covered the short sale by buying the stock for the price of $70. You paid $.25 per share in commissions for each transaction. Sienar Fleet Systems Market Price, January 1$85.00 Market Price, March 1$82.00 Dividend, March 1$2.00 Market Price, April 1$79.00 Broker Commission, per Share$0.25 Maintenance Margin0.35 Investor Shares Sold Short100 Required: Using the information in the tables above (the Company, the Broker, and the Investor), solve the cash flows involved in the short sale of this company. Then calculate the rate of return. (Use cells A5 to B15 from the given information to complete this question.) Short Sale Net Proceeds from Short Sale Dividend Payment Buyback Proceeds Net Profit Percent Return on Investment

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Answered: Using the information in the tables…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter15: Dividend Policy

Section: Chapter Questions

Problem 2P

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You are bearish on Sienar Fleet Systems, you sold short one round lot (100 shares) at $85 per share. On March 1, a dividend of $2 per share was paid. On April 1, you covered the short sale by buying the stock for the price of $70. You paid $.25 per share in commissions for each transaction.

Sienar Fleet Systems
Market Price, January 1	$85.00
Market Price, March 1	$82.00
Dividend, March 1	$2.00
Market Price, April 1	$79.00

Broker
Commission, per Share	$0.25
Maintenance Margin	0.35

Investor
Shares Sold Short	100

Required:
Using the information in the tables above (the Company, the Broker, and the Investor), solve the cash flows involved in the short sale of this company. Then calculate the rate of return.

(Use cells A5 to B15 from the given information to complete this question.)

Short Sale
Net Proceeds from Short Sale
Dividend Payment
Buyback Proceeds
Net Profit
Percent Return on Investment

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