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Suppose a stock has a current price of S0, and pays an expected quarterly dividend...

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Accounting

Suppose a stock has a current price of S0, and pays an expected quarterly dividend of $5. You hold a short position for 90 days, and then close your short at a price S90.

a. Draw a diagram showing your cash flows over the 90 day period. Describe the transactions or activities that result in each cash flow.

b. What are the dividend tax consequences for you? for the r share lender?

c. Suppose the actual dividend is less than expected. What is the impact on your profit of loss?

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