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You feel very strongly that the stock in McDonald's Corporation is about to fall from its present level of $85 per

share. You call your broker and have him sell 5,000 shares short. This costs you $525 in commissions.     


  1. By law, what is the minimum amount of cash you have to have in your bank account before your broker will do the trade?    


As anticipated, McDonald's stock drops to a low $45 per share. You call your broker and have him repurchase the 5,000 borrowed shares. This costs you $525 in commissions.


2.. If during the time time you sold this stock short, McDonald's stock paid a dividend of $3.50 per share, calculate your total rate of return for this investment. Assume that the cash you originally had in your account was the minimum required by law. 

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