Strategy Beginner: Dollar Cost Averaging

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1.
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?
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$4.10. Divide the total amount you paid ($800) by the number of shares bought (195).
2.
With dollar cost averaging, when the share price rises, you buy more shares, and when the share price falls, you buy fewer shares.
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False. You always invest the same dollar amount, so when the share price rises, you buy fewer shares, and when the share price falls, you buy more shares.
3.
On the average, investing the same amount of money each period with dollar cost averaging allows you to pay less per share than you would if you had bought the same number of shares each period.
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True. When you average the prices, you find that you have paid less per share than you would have if you had bought the same number of shares each period.
4.
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.
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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.
5.
Dollar cost averaging is the practice of _______.
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Putting the same amount of money into an investment each period. In other words, you are buying the same dollar amount of shares each period.