You short sell 500 shares of stock at an initial margin of 50 percent. What is the most you can make on this transaction if the short sale occurs at a price of $38 per share?
A) $8,500
B) $19,000
C) $17,000
D) $9,500
E) There is no limit.

Question

Quizplus · Accepted Answer

The most you can make is if the stock price drops to $0. You sold 500 shares at $38, so you received $19,000. If the stock goes to $0, you don't have to pay anything to buy back the shares, thus making $19,000.

You Short Sell 500 Shares of Stock at an Initial