Posted by **Mwende** on Friday, March 8, 2013 at 2:45pm.

You decide to sell short 100 shares of Charlotte Farms when it is selling at its yearly high of $56. Your broker tells you that your margin requirement is 45% and that the commission on the purchase is $155. While you are short the stock, Charlotte pays a $2.50 per share dividend. At the end of 1 year, you buy 100 shares of Charlotte at $45 to close out your position and are charged a commission of $145 and 8% interest on the money borrowed. What is your rate of return on the investment?

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