Question
Dollar cost averaging is an investment strategy whereby you invest a fixed dollar amount in a security at predetermined intervals. The premise is that more
Dollar cost averaging is an investment strategy whereby you invest a fixed dollar amount in a security at predetermined intervals. The premise is that more shares are purchased when the market is down, which over the long-term creates an average cost per share lower than just the arithmetic average of prices. If your annual $5,000 contributions to the ABC Mutual Stock Fund occurred over five years, as depicted below, then what is your dollar cost average per share?
Year 1 share price = $25
Year 2 share price = $28.50
Year 3 share price = 24.25
Year 4 share price = 19.75
Year 5 share price = 22.60
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