Question

A customer has sold short 100 shares of ABC stock in a margin account. ABC declares and pays a 10% stock dividend. How many shares must be purchased to close out the short position?

A. 90
B. 100
C. 105
D. 110

Answer 1

Answer:

Option D, 110, is the right answer.

Explanation:

Total number of shares that short = 100 share

The rate of dividend that ABC declares and pays = 10%

Now we have to find the number of shares that should be purchased in order to close out the short position.

Number of shares =  100 × 110%

Number of shares =  100  × (110 / 100)

Number of shares =  110

Thus, option D 110 is correct.