Question

10) Assume that you open a 100-share short position in Jiffy, Inc. common stock at the bid-ask prices of $32.00 - $32.50. When you close your position, the bid-ask prices are $32.50 - $33.00. You pay a commission rate of 0.5%. The market interest rate is 5.0% and the short rebate rate is 3.0%. What is your additional gain or loss due to leasing the asset?

A) $64.00 loss

B) $160.00 loss

C) $96.00 gain

D) $0

Answer:  A

Answer 1

Market rate = 5%, Rebate rate =3% Effective interest rate = 5%- 3% = 2% Gain loss due to leasing asset= effective interest rate* price * number of shares

= 2% * 32* 100 = 64