Study the table below.Day Price June 1st$99July 1st$75August 1st$33The table shows the price of Camden Construction stock on several days. Which of the trades listed below would have earned a profit?I. buying the stock on June 1st and selling July 1stII. shorting the stock from July 1st to August 1stIII. buying the stock on June 1st and selling August 1st
Accepted Solution
A:
In order for a trade to earn a profit, the stock must be sold for more than it was bought. For example, if I buy an apple for 25 cents and sell it to someone else for a dollar, I made a 75 cent profit.
Shorting is when you borrow a stock from someone and selling it. Then, you later buy the stock back and return it.
Now let's examine the options.
I. Bought for $99 and sold for $75 does NOT earn a profit.
II. Sold for $75 and bought for $33 DOES earn a profit.
III. Bought for $99 and sold for $33 does NOT earn a profit.