Exhibit 4.5 USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)

question 48

Multiple Choice

Exhibit 4.5
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
You decide to sell 100 shares of Topgun Enterprises Inc. short when it is selling at its yearly high of $42.25. Your broker tells you that your margin requirement is 60 percent and that the commission on the sale is $20. While you are short, Topgun pays a $0.85 per share dividend. At the end of one year you buy your Topgun shares (cover your short sale) at $44 and are charged a commission of $20 and a 5 percent interest rate.
-Refer to Exhibit 4.5. What is your rate of return on the investment?

• A)10.48%
• B)12.87%
• C)-13.98%
• D)-24.49%
• E)-15.05%

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Definitions:

Working Capital Needs

The funds required to finance the day-to-day operations of a business, including managing its short-term assets and liabilities.

Explicit Interest

The stated interest rate on a loan or financial instrument, not including the effects of compounding or any hidden charges.

Factoring

Financing method where a firm sells its accounts receivables, usually to a specialized financing company, at a discount to their full value.

Receivables

Payments due from clients to a business for the delivery of goods or services that have not yet been compensated.