Q. Suppose you want to short-sell= 100 shares of MNO stock, that has a bid price of= $49.22 also an ask price of $49.87. You cover short position 270 days later when bid price is= $46.87 also asks price is $47.50. Suppose that there is= 0.4% commission to engage in short sale also 0.3% commission to close short-sale. Suppose lender keeps whole proceeds from short sale as collateral.
a) What profit did you generate?
b) Suppose 9-month interest rate is= 6%, also that rebate for MNO stock offered by lender is 2%. How much interest accrues during nine months in which you have short position? Does this decrease or raise your profit?