Question
Lisa recently purchased 80 shares of a company for $8800 ($110 per share). The company has been doing well. Given the success of the company,
Lisa recently purchased 80 shares of a company for $8800 ($110 per share). The company has been doing well. Given the success of the company, her shares are now worth $190 each. This year, she received a dividend of $880, which she reinvested to purchase 5 shares of stock in the company. How does Lisas decision to reinvest her dividend (buy more stock) affect her total basis in the investment?
Group of answer choices
Lisas total basis is not affected by reinvesting her dividends.
Lisas total basis decreased to $7920 and then increased back to $8800.
Lisas total basis increased from 80 shares to 85 shares.
Lisas total basis invested increased from $8800 to $9680.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started