Question

1.

a. On January 2, you sold short 1,000 shares of ABC stock at $25 per share. On March 2, a dividend of $1 per share was paid. On April 2, covered the short sale by buying the stock at a price of $23 per share. You paid $20 in commissions for the roundtrip ($10 to short, $10 to cover). Assuming you have no other positions, what is the value of your account on April 2? Present your answer rounded to the nearest cent in this format, $123.45

b.

What would happen to the divisor of a market-weighted index if one of its constituents did a 2:1 stock split?

a-Nothing

b-Get smaller

c-Get bigger

Answer 1

Shares are short sale and position is closed by buying the stock. Also dividend received on shares are lost as shares are short(sold), so it will be deducted  
Profit or loss per share = *(Price for short sale- Buying or closing price - Dividend paid))  
(25-23-1)=   1
Total position = (No of shares * Profit per futures)-Chrages  
(1000*1)-20  
980  
So total position on April 2 (Closing position) is   $980.00
  

(B)
Market value index is comprised of Market value of each of its stock.   
If one of constituents did 2:1 stock split, Market value does not change with stock split. So Market weighted index value will also not change and so divisor will not change  
So divisor of a market-weighted index will have NOTHING change, if one of its constituents did a 2:1 stock split .Answer is
a-Nothing