1. Suppose you sell short 100 shares share of stock initially selling for
$100 a share. Your initial margin requirement is 50% of the value of
the stock sold. You receive no interest on the funds placed in your
margin account.
(iii) $110
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2. Repeat question 1 but now assume that the stock pays dividends of $2
per share at year-end. What is the relationship between the total rate
of return on the stock and the return to your short position?
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