Problem #2: Short Sales (26 points) 1. You sell short 300 shares of the common stock of DeVito Taxi Co, at $48.50 per share. The initial margin requirement is 60% and the maintenance margin on your account is 30%. a. What is the required amount of your initial investment? Amount Amount of Initial Investment (3 points) SUPPORTING COMPUTATION REQUIRED: b. After one month, the market price of the stock is $45 per share. Will you be subject to a margin call? Explain. (3 points) C. After one year, the market price of the stock is $32.85 per share. During the year, DeVito Taxi Co. paid a dividend of $1.24 per share. The broker charged you a fee of 2.0% on the original sale. What is your return on the short sale of the DeVito Taxi Co. stock? Amount Return on Short Sale (3 points) SUPPORTING COMPUTATION REQUIRED: d. During the subsequent year, DeVito Taxi Co. suffers a major uninsured casualty. The company is forced to declare bankruptcy and its stock becomes worthless. Briefly explain how that event would affect your short sale account and your return on your investment. (Calculations are not required.) (3 points)