(cover your short sale) at P44 and are charged a commission of P20 and a 5% interest rate. a.      What is your peso return on the investment? (Show the solution and computation). a.      P384.50 b.      P432.88 c.       -P432.88 d.      -P384.50 b.      What is your rate of return on the investment? a.      10.48%

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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1.     You decide to short sell 100 shares of ABC Corporation when it is selling at its yearly high of P42.25. Your broker tells you that your margin requirement is 60% and that the commission on the sale is P20. While you are short, ABC Corporation pays a P.85 per share dividend. At the end of one year you buy your ABC Corporation shares (cover your short sale) at P44 and are charged a commission of P20 and a 5% interest rate.

a.      What is your peso return on the investment? (Show the solution and computation).

a.      P384.50

b.      P432.88

c.       -P432.88

d.      -P384.50

b.      What is your rate of return on the investment?

a.      10.48%

b.      12.87%

c.       -15.05%

d.      -13.98%

 

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