Question

A stock is currently selling for $60.00 a share. What is the gain or loss on the following transactions? Use a minus sign to enter the amount as a negative value. Round your answers to the nearest cent.

1. You take a long position and the stock’s price declines to $58.85.

   $  

2. You sell the stock short and the price declines to $58.85.

   $  

3. You take a long position and the price rises to $62.65.

   $  

4. You sell the stock short and the price rises to $62.65.

   $  

Answer 1

a . When a long position is taken, we have to sell the stock to clear the position.

So, the stock sill be sold at $58.85

Gain/Loss = Selling Price - Purchase Price = $58.85 - $60 = -$1.15

b . When a Short position is taken, we have to buy the stock to clear the position.

So, the stock sill be sold at $58.85

Gain/Loss = Selling Price - Purchase Price = $60 - $58.85 = $1.15

Note : To take a short position, the stock is sold at 58.85

c . When a long position is taken, we have to sell the stock to clear the position.

So, the stock sill be sold at $62.65

Gain/Loss = Selling Price - Purchase Price = $62.65 - $60 = $2.65

d . When a short position is taken, we have to buy the stock to clear the position.

So, the stock sill be sold at $62.65

Gain/Loss = Selling Price - Purchase Price = $60 - $62.65 = -$2.65