USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)

question 4

Multiple Choice

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 3.5. What is your dollar return on the investment?

• A) $384.50
• B) $432.88
• C) -$432.88
• D) -$384.50
• E) -$950.55

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Definitions:

Stop-Payment Order

A request made to a bank to cancel a check or payment before it has been processed.

Comparative Fault

A legal doctrine that allocates damages based on the degree of fault or negligence found against each party in a lawsuit.

Forged Checks

Checks that have been illegally modified or created without authorization to benefit the forger.

Stop Payment

An instruction given to a bank by an account holder not to pay a check or payment that has been issued but not yet cashed.