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Basic Question 8 of 16
If Frank shorted $20,000 worth of Microsoft stock and the stock fell 50%, Frank has ______
B. made $10,000.
C. lost $10,000.
D. made $5,000 and eliminated margin requirements.
A. covered his short position.
B. made $10,000.
C. lost $10,000.
D. made $5,000 and eliminated margin requirements.
User Contributed Comments 8
| User | Comment |
|---|---|
| cptp | can anyone explain how? |
| sirikaru | you are selling short Microsoft stock for $20000. Stock fell 50% which means you are buying the same stock for $10000 and covering your short sale.you made a profit of $10000.($20000 - $10000). |
| IvanTG | Unrealized profit until purchased of course... |
| jpducros | 10.000 usd profit minus the loan cost on margin. |
| yesandy11 | He bought at $10,000 and sold at $20,000 (just in reverse). $10,000 in profit. |
| LordRommel | oh my god! my head is spinning |
| thekobe | he borrowed 20000 stocks with a value of $1 each one, the price fell to $0.50 and he replaces the 20000 stocks at the current price, so he made $10,000 |
| moneyguy | Thank you, thekobe. |
I passed! I did not get a chance to tell you before the exam - but your site was excellent. I will definitely take it next year for Level II.
Tamara Schultz
Learning Outcome Statements
compare positions an investor can take in an asset
calculate and interpret the leverage ratio, the rate of return on a margin transaction, and the security price at which the investor would receive a margin call
CFA® 2024 Level I Curriculum, Volume 3, Module 1.