An investor shorts 100 shares when the share price is $50 and closes out the position six months later when the share price is $43 . The shares pay a dividend of $3 per share during the six months. How much does the investor gain?
A. $1,000
B. $400
C. $700
D. $300
B
The investor gains $7 per share because he or she sells at $50 and buys at $43 . However, the investor has to pay the $3 per share dividend. The net profit is therefore 7?3 or $4 per share. 100 shares are involved. The total gain is therefore $400 .
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