Choose wisely. There is only one correct answer to each question.
0%
Keep studying!
Review your answers below to learn more.
1.
When you invest the same amount of money each period with dollar cost averaging instead of buying the same number of shares, you will make more money, assuming you subsequently sell at a higher price.
True. When you dollar cost average, the price you pay per share is lower than the highest price paid, but higher than the lowest price paid. Your average cost per share will be lower this way -- and your gain will be higher -- than if you had bought the same number of shares each month.
2.
Compared to buying the same number of shares each period, if you invest the same amount of money instead with dollar cost averaging, you will usually _________.
Pay less per share. When you average the prices you pay, you find that you have paid less per share.
3.
In dollar cost averaging, the formula for average price per share is this: total amount paid divided by number of shares bought.
True. Total amount paid and number of shares bought are the two factors that yield the average price per share.
4.
To use dollar cost averaging, you must invest in the same _______ every time you invest.
Dollar amount of shares. When using dollar cost averaging, you must invest the same amount of money every time you invest.
5.
Imagine that you have bought $800 worth of stock shares over four months. Due to price fluctuations, the number of shares you bought was 195. What is the average price per share?
$4.10. Divide the total amount you paid ($800) by the number of shares bought (195).