Two years ago, Lizzy Martinez, from Atlanta, GA, invested $1,000 by buying 125 shares (8$ per share NAV) in the Can't Lose Mutual Fund, an aggressive growth no-load mutual fund. Last year, she made two additional investments of $500 each (50 shares at $10 and 40 shares at $12.50). Lizzy reinvested all of her dividends. So far, the NAV for her investment has risen from $8 per share to $13.25. Investors can use the IRS's "average-cost basis method" to determine the average price paid for one share. Begin by calculating the average price paid for the shares. In this case, the $2,000 is divided by 215 shares (125 shares+50 shares+40 shares). What was the average price paid by Lizzy?
Two years ago, Lizzy Martinez, from Atlanta, GA, invested $1,000 by buying 125 shares (8$ per share NAV) in the Can't Lose Mutual Fund, an aggressive growth no-load mutual fund. Last year, she made two additional investments of $500 each (50 shares at $10 and 40 shares at $12.50). Lizzy reinvested all of her dividends. So far, the NAV for her investment has risen from $8 per share to $13.25.
Investors can use the IRS's "average-cost basis method" to determine the average price paid for one share. Begin by calculating the average price paid for the shares. In this case, the $2,000 is divided by 215 shares (125 shares+50 shares+40 shares). What was the average price paid by Lizzy?
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