After researching Valero Energy common stock, Sandra Pearson is convinced the st

Question

After researching Valero Energy common stock, Sandra Pearson is convinced the stock is overpriced. She contacts her account executive and arranges to sell short 270 shares of Valero Energy. At the time of the sale, a share of common stock has a value of $33. Three months later, Valero Energy is selling for $24 a share, and Sandra instructs her broker to cover her short transaction. Total commission to buy and sell the stock were $74. What is her profit for this short transaction? Round your answer to the nearest whole dollar. Do not include the comma, period, and "$" sign in your response.

Explanation / Answer

Calculations

270 shares @ 33 (short selling) = 8910

270 shares @ 24 = 6480

Total Commission to buy & sell = 74

Net Profit = 8910 - 6480 - 74 = 2356

Profits are made from a decrease in price of a stock under short selling.

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