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Suppose you have £20,000 in cash to invest. You decide to short sell £10,000 worth of Coca-Cola and invest the proceeds from your short sale plus your £20,000 in Intel. The initial price of Coca-Cola is £40 and increases to £42.40 producing a return of 6%. The initial price of Intel is £25 and increases to £31.50 producing a return of 26%. How many shares of Coca-Cola have you short sold and how many shares of Intel do you currently have? Select one: a. Short sold 2,000 shares of Coca cola and invested in 80 shares of Intel b. Short sold 40 shares of Coca cola and invested in 400 shares of Intel c. Short sold 250 of Coca cola and invested in 1200 shares of Intel d. Short sold 300 of Coca cola and invested in 12000 shares of Intel

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Answer:

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Step-by-step explanation:

The number of shares of Coca-Cola short sold and number of Intel shares bought are c. Short sold 250 of Coca cola and invested in 1200 shares of Intel.

Data and Calculations:

Cash available for investment = £20,000

Proceeds from short sale of Coca-Cola = £10,000

Total funds available for investment = £30,000

Initial price of Coca-Cola per share = £40

Number of Coca-Cola shares short sold = 250 (£10,000/£40)

Initial price of Intel stock per share = £25

Number of Intel shares acquired = 1,200 shares (£30,000/£25)

Thus, you short sold 250 shares of Coca-Cola stock and invested in 1,200 shares of Intel stock.

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