Question

Over the past 2? years, Jonas Cone has used a? dollar-cost averaging formula to purchase $ 400 worth of FCI common stock each month. The price per share paid each month over the 2 years is given in the following table. Assume that Jonas paid no brokerage commissions on these transactions.?

Price per Share of FCI
Month Year_1 Year_2
January $11.78 $11.28
February 11.11 12.31
March 11.99 11.95
April 10.69 11.56
May 12.24 12.45
June 12.28 12.63
July 12.51 12.83
August 12.62 13.49
September 12.95 13.14
October 12.96 12.57
November 12.14 13.78
December 11.61 13.73

a.??How much was? Jonas's total investment over the? 2-year period?

b.??How many shares did Jonas purchase over the? 2-year period?

c.??Use your findings in parts a and b to calculate? Jonas's average cost per share of FCI.

d.??What was the value of? Jonas's holdings in FCI at the end of the second? year?

Answer 1

a) Jonas has paid $400 every month to acquire common stock over a period of two years. Therefore, total investment in two years = 2 x 12 x 400 = $9,600

b)

Month	Year 1	No. of shares (400/price)	Year 2	No. of shares
Jan	11.78	34	11.28	36
Feb	11.11	36	12.31	33
Mar	11.99	33	11.95	33
Apr	10.69	37	11.56	35
May	12.24	33	12.45	32
Jun	12.28	33	12.63	32
July	12.51	32	12.83	31
Aug	12.62	32	13.49	30
Sept	12.95	31	13.14	30
Oct	12.96	31	12.57	32
Nov	12.14	33	13.78	29
Dec	11.61	35	13.73	29
	Total	400		382

c)

Average cost per share in year 1 = $4,800/400= $12

Average cost per share in year 2 = $4,800/382= $12.57

d) Total number of shares at the end of two year period = 400+382 = 782

End month price = $13.73

Value of Jonas's holding = $13.73 x 782 = $10,736.86