Contemporary Mathematics for Business & Consumers 8th Edition by Robert Brechner,Geroge Bergeman

Exercise 138

Though investing all at once works best when stock prices are rising, dollar-cost averaging can be a good way to take advantage of a fluctuating market. Dollar-cost averaging is an investment strategy designed to reduce volatility in which securities are purchased in fixed dollar amounts at regular intervals regardless of what direction the market is moving. This strategy is also called the constant dollar plan.
You are considering a hypothetical $1,200 investment in Century Media Corporation stock. Your choice is to invest the money all at once or dollar-cost average at the rate of $100 per month for one year. Assume that Century Media allows you to purchase "fractional" shares of its stock.
a. If you invested all of the money in January and bought the shares for $10 each, how many shares could you buy
b. From the following chart of share prices, calculate the number of shares that would be purchased each month using dollar-cost averaging and the total shares for the year. Round to the nearest tenth.

c. What is the average price you pay per share if you purchase them all in January
d. What is the average price you pay per share if you purchase them using dollar-cost averaging