Mr. Gilbert believing that the price of Caterpillar which is $ 255 today will go down significantly decides to short sell 200 shares of Caterpillar by borrowing them from his brokerage house A) How much collateral must be shown by Mr. Gilbert for his short sale operation? B) What will be the net profit of Mr. Gilbert if Caterpillar goes down to $140 after two months and if the annual interest rate in US for short sale operations is 4.8% ?
Mr. Gilbert believing that the price of Caterpillar which is $ 255 today will go down significantly decides to short sell 200 shares of Caterpillar by borrowing them from his brokerage house A) How much collateral must be shown by Mr. Gilbert for his short sale operation? B) What will be the net profit of Mr. Gilbert if Caterpillar goes down to $140 after two months and if the annual interest rate in US for short sale operations is 4.8% ?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Mr. Gilbert believing that the price of Caterpillar which is $ 255 today will go down significantly decides to short sell 200 shares of Caterpillar by borrowing them from his brokerage house A) How much collateral must be shown by Mr. Gilbert for his short sale operation? B) What will be the net profit of Mr. Gilbert if Caterpillar goes down to $140 after two months and if the annual interest rate in US for short sale operations is 4.8% ?
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