You think that there will be a further slowdown in economic growth and you think that this will hit the retail industry. You take a closer look at Target, one of the largest retailers in the US. On Google finance you see that over the year-to-date return on Target stock is 14.5% while S&P has decreased by 14.8%. You call up your broker and ask her to short sell 200 shares of Target stock which is trading at 57. For collateral, you put up 6,000 in cash. You decide to hold the short position for 1 year and you expect Target to pay a dividend of 0.60 over this period. In one year Target is trading at 45- sales and net income declined at Target. Assume that the brokerage account pays no interest.

STEP BY STEP SHOW:

A) When you open your position, what is the margin of your account?

B) What is the return of your interest?