Final answer:
The remaining margin in the short sale account is calculated to be $29,200, which is different from the options provided. It appears there might be a mistake or there is additional context required for the multiple-choice answers given.
Step-by-step explanation:
The question involves understanding the margin account mechanics for a short sale of stock, which is a scenario where an investor borrows shares they do not own to sell on the market, hoping the price will fall. Old economy traders short-sell 1,000 shares at $100 per share with a 50% initial margin requirement, a year later the share price rises to $104.80, and dividends of $16.00 per share have been paid. The initial value of the short sale is 1,000 shares × $100/share = $100,000. The initial margin is 50% of this, which is $100,000 × 50% = $50,000.
After a year, the shares are worth 1,000 × $104.80/share = $104,800. Additionally, dividends of 1,000 × $16.00/share = $16,000 must be paid by the short seller since they benefit the actual owner of the shares. The remaining margin in the account is the initial margin minus the increase in the value of the shares plus the dividends paid out. Therefore, $50,000 - $4,800 - $16,000 = $29,200. To calculate the margin on the short position, we need to determine the equity left in the account after accounting for the current value of the shorted shares. This can be done by subtracting the current value of the shares (including the dividend paid) from the initial margin.