Problem bank
Problem 274 of 333EasyFinanceP274
Dollar-cost averaging and the harmonic mean
You invest $1,000 in a stock at the start of each of three months, when its price is $10, $20 and $40.
(a) What is your average cost per share, and how does it compare with the average of the three prices?
(b) Show that for any positive prices , investing a fixed dollar amount each period gives an average cost per share no higher than the average price. When are they equal?
(c) Does this show that dollar-cost averaging beats investing everything up front?
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