Canadian Securities Course (CSC) Practice Exam · Question
A short seller sells 1,000 shares of XYZ Corp. at $75 per share, borrowing them through their dealer. Their margin requirement is 150% of the market value. If XYZ Corp. shares fall to $60, what is the short seller's profit before commissions and interest on the borrowed shares?
The short seller sells 1,000 shares * $75 = $75,000. They buy back 1,000 shares * $60 = $60,000 to cover the short. The profit is $75,000 - $60,000 = $15,000. T
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Question: A short seller sells 1,000 shares of XYZ Corp. at $75 per share, borrowing them through their dealer. Their margin requirement is 150% of the market value. If XYZ Corp. shares fall to $60, what is the short seller's profit before commissions and interest on the borrowed shares?
Answer options: ✅ $15,000
- $10,000
- $22,500
- $7,500
Correct answer: $15,000
Explanation: The short seller sells 1,000 shares * $75 = $75,000. They buy back 1,000 shares * $60 = $60,000 to cover the short. The profit is $75,000 - $60,000 = $15,000. The margin requirement is irrelevant for calculating the gross profit.
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