Suppose you desire to short-sell 400 shares of ABC stock, which has a bid price of $ 27.45 and an ask price of $ 28.55 . You cover the short position 180 days later when the bid price is $ 22.3 and the ask price is $ 23.4.

a) Taking into account only the bid and ask prices (ignoring commissions and interest), what profit did you make: $ ?

b) Suppose that there is a 0.9 % commission to engage in the short-sale (this is the commission to sell the stock and a 0.9 % commission to close the short-sale (this is the commission to buy the stock back). Considering these commissions, what profit did you make: $ ?

c) Suppose the 6-month interest rate is 9 % and that you are paid no interest on the short-sale proceeds. Still assuming that there is a 0.9 % commission to engage in the short-sale, how much interest do you lose during the 6 months in which you have the short position: $ ?