F IL E According to dollar cost averaging, a fixed amount of money is invested periodically in a portfolio. Consequently, more units of a financial asset are purchased when prices are low and fewer units are purchased when prices are high.

Robert Dudek follows dollar cost averaging by making a monthly investment of $500 toward retirement. His monthly investment is divided equally among tw o T. Rowe Price mutual funds: Equity Income and Short-term Bond funds.

The following table represents the monthly adjusted close price of the funds in 2009. The data set can also be found on the text website, labeled Returns 2 0 0 9.

Month Eqlnc Bond Month Eqlnc Bond January 14.77 4.47 July 18.4 4.72 February 12.93 4.49 August 19.45 4.75 March 14.14 4.53 September 19.92 4.78 April 16.04 4.58 October 19.53 4.80 May 16.87 4.64 November 20.60 4.85 June 16.89 4.66 December 20.99 4.82 Source: http://finance.yahoo.com.

a. Compute and interpret the Laspeyres price index.

b. Compute and interpret the Paasche price index.

c. Why are the results of the two indices different?