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Dollar gross and net gain or loss

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You open a margin account at Chas Pigeon, a discount broker. You subsequently short 100 shares of Exciting.com at $300 per share, believing it to be overpriced. This transaction is done on margin, which has an annual interest rate of 6 percent. Exactly one year later, Exciting has declined to $60 a share, at which point you cover your short position. You pay brokerage costs of $25 on each transaction you make. The margin requirement is 50 percent.

(a) Calculate your dollar gross and net gain or loss on this position, taking into account both the margin interest and the transaction cost to sell. Round your answers to nearest whole number

(b) Calculate the percentage return on your investment (the amount of money you put up initially, including the brokerage costs to buy). Round your answers to nearest whole number

Reference no: EM132538924

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