1. The expected cash flow for a 1,000-share short sale would be the amount received from selling the shares. If the price per share is $10, then the cash flow would be $10,000.

If Dave had used the broker’s entire extended margin loan, he could have purchased 10,000 shares (the amount of the margin loan divided by the price per share).

Dave’s total return as of the end of day on Monday would depend on the price at which he sold the shares. If he sold them at $10 per share, his total return would be $10,000 (the cash flow from the short sale) minus any borrowing costs or fees.

Margin accounting involves keeping track of the borrowed funds and the value of the securities purchased with those funds. The brokerage statement would show the initial margin requirement, the amount borrowed, the value of the securities, any interest or fees charged, and the equity (the difference between the value of the securities and the amount borrowed).

1. The average price of Dave’s position as of the end of day on Tuesday would depend on the price at which he bought the shares. If he bought them at $10 per share, then the average price would still be $10 per share.

Dave’s total return as of the end of day on Tuesday would depend on the price at which he sold the shares. If he sold them at $9 per share, his total return would be the cash flow from the short sale ($10,000) minus the cost of buying the shares ($10,000) and any borrowing costs or fees.

If Dave had not borrowed on margin, his return would be the same as his total return as of the end of day on Tuesday, as he would not have any borrowing costs or fees to subtract.

1. If the price of KNIGHT had increased to $15.00, Dave’s equity would be the value of the shares minus the amount borrowed. If he had 10,000 shares and the price was $15.00, his equity would be $150,000 minus the amount borrowed.

Dave could have other alternatives to selling 9,000 shares at $9.00. He could hold onto the shares and hope for a further increase in price, or he could sell a smaller number of shares at a higher price.

Dave’s total return as of the end of day on Wednesday would depend on the price at which he sold the shares. If he sold them at $9 per share, his total return would be the cash flow from the short sale ($10,000) minus the cost of buying the shares ($10,000) and any borrowing costs or fees.

1. Dave could have sold fewer than 5,000 shares and met the margin call if the price per share was high enough. The margin call is typically a percentage of the value of the securities, so if the price per share was high enough, selling fewer shares could still meet the margin call.

Dave’s total return as of the end of day on Thursday would depend on the price at which he sold the shares. If he sold them at $8 per share, his total return would be the cash flow from the short sale ($10,000) minus the cost of buying the shares ($10,000) and any borrowing costs or fees.

1. Dave lost so much money because he had borrowed on margin, which magnified his losses. When the price of the stock went down, the value of his position decreased, but he still had to repay the borrowed funds. This resulted in a larger loss than if he had not borrowed on margin.

If Dave had not borrowed on margin, his return would be the same as his total return as of the end of day on Thursday, as he would not have any borrowing costs or fees to subtract. Borrowing on margin was not necessarily Dave’s fundamental mistake, but it did increase his risk and potential losses.