Suppose You Have $10,000 in Cash to Invest

Multiple Choice

Suppose you have $10,000 in cash to invest. You decide to sell short $5,000 worth of Kinston stock and invest the proceeds from your short sale, plus your $10,000 into one-year U.S. treasury bills earning 5%. At the end of the year, you decide to liquidate your portfolio. Kinston Industries has the following realized returns: The return on your portfolio is closest to:

A) -0.5%
B) 13.5%
C) -2.5%
D) 14.5%