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You sell short 600 shares of Microsoft that are currently selling at $25 per share. You post the 40% margin required on the short sale. If you earn no interest on the funds in your margin account, what will be your rate of return after 1 year if Microsoft is selling at $24? (Ignore any dividends.) Multiple Choice 10.00% 7.50% 17.50% 5.00%

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abiolataiwo2015

Answer:

10.00%

Explanation:

Calculation for what will be your rate of return after 1 year if Microsoft is selling at $24

Using this formula

Rate of return = (Current price - Initial price ) /Current price *margin

Let plug in the formula

Rate of return=($25 per share-$24)/$25 per share*0.40

Rate of return=$1/10

Rate of return=0.1*100

Rate of return=10.00%

Therefore what will be your rate of return after 1 year if Microsoft is selling at $24 is 10.00%

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