Question

At the beginning of the month, you sell short 200 shares of Wells Fargo that are currently selling at $45 per share. One month later you cover your short position at $52 per shares. During the month, Wells Fargo issued $2 dividend per share. What is you return during this month?

		-0.200
		0.200
		-0.156
		-0.111
		0.111

Answer 1

Correct Answer is option A
Return during this month is -20% or -0.20
Short at - 45
Buy at -52
Loss = 52-45 = 7per share
when you short sell the share and if the comapny os pay dividend you have to pay the dividend amount to whom they lend the share to you.
You have to pay $2 per share of dividend also
Total Loss = 7 + 2 = 9 per share
Return = -9 /45 *100
Return = -20%