Question

In: Finance

1. You have decided to purchase 1,000 shares of Caterpillar and short 600 shares of Home...

1. You have decided to purchase 1,000 shares of Caterpillar and short 600 shares of Home Depot. Complete these transactions on Stock-Trak.

2. Stock Transactions The next day, you decide that you want only 600 shares of Caterpillar and want to short 200 more shares of Home Depot. Complete the necessary transactions.

3. Stock Transactions You have now decided to close your long position in Caterpillar and close out your short position in Home Depot. Complete the necessary transactions. What is your total dollar gain or loss on these transactions?

(use any dollar amount)

Expert Solution

Hi

Based on the stock trading below is the stock track data,

Stocks	Day 1			Day 2			Day 3
Stocks	Buy	Sell	Total Shares Held	Buy	Sell	Total Shares Held	Buy	Sell	Total Shares Held
Caterpillar	1000		1000		400	600		600	0
Home Depot		600	600		200	800	800		0

Day 1

Let's say Price of Caterpillar = $100

Price of Home Depot = $50

Total Value of Caterpillar bought= $100*1000 = $100,000

Total Value of Home Depot sold= $50*600 = $30,000

Day2

Let Price of Caterpillar = $110

Price of Home Depot = $40

Selling Value of Caterpillar = $110*400 = $44,000

Profit = $(110-100)*400 = $4000

now net Value of Caterpillar bought= $100000-$44000 = $56,000

Selling Value of Home Depot = $40*200 = $8000

Net Selling Value of Home Depot = $8000+$30000 = $38,000

Day3

Let Price of Caterpillar = $105

Price of Home Depot = $45

Selling Value of Caterpillar = $105*600 = $63,000

Final Net Profit value of Caterpillar = $63000-$56000 = $7000

Buying Value of Home Depot = $45*800 = $36,000

Net Profit Value for Home Depot = $38000-$36000 = $2000

jeff jeffy answered 5 months ago

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