Exhibit 4.6 USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)

question 79

Multiple Choice

Exhibit 4.6
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)

You decide to sell short 200 shares of XCorp stock at a price of $75. Your margin deposit is 65 percent. Commission on the sale is 1.25%. While you are short, the stock pays a $1.75 per share dividend. Interest on margin debt is 5.25% per year.
-Refer to Exhibit 4.6.At the end of one year you close out your short position by purchasing share of XCorp at $45 per share.The commission is 1.25%.What is your rate of return on the investment?

• A) -55.92%
• B) 10.31%
• C) 51.06%
• D) 23.1%
• E) -33.05%

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Definitions:

LIFO Method

An inventory valuation method that assumes the last items placed in inventory are the first ones sold; LIFO stands for Last-In, First-Out.

FIFO Method

First In, First Out, an inventory valuation method that assumes that the first items placed into inventory are the first sold.

Ending Inventory

The total value of goods that remain unsold at the end of the accounting period.

Holding Gains

Profits resulting from the increase in value of an asset held over time, not realized until the asset is sold.