Understanding Dollar Cost Averaging

Understanding Dollar Cost Averaging

Assessment

Interactive Video

Mathematics, Business

9th - 12th Grade

Practice Problem

Hard

Created by

Lucas Foster

FREE Resource

The video explains dollar cost averaging, a passive investment strategy that involves investing in a stock or mutual fund over time to mitigate short-term volatility. It compares this strategy with market timing through a scenario involving three investors: Rick, Lisa, and Kim. Rick invests all at once, Lisa tries to time the market, and Kim uses dollar cost averaging. The video calculates the return on investment (ROI) for each, showing that while Lisa achieved the highest ROI, Kim's strategy required less effort and still yielded a good return.

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10 questions

Show all answers

1.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

What is the primary benefit of using dollar cost averaging as an investment strategy?

It eliminates the need for market timing.

It is a short-term investment strategy.

It requires extensive market research.

It guarantees the highest return.

2.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

In the investment scenario, how much did each investor plan to invest in stock XYZ?

$20,000

$15,000

$12,000

$10,000

3.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

How many shares did Rick purchase when he invested in stock XYZ?

800 shares

600 shares

700 shares

500 shares

4.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

What was Rick's return on investment (ROI) percentage?

30%

10%

40%

20%

5.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

Why did Lisa own more shares than Rick?

She used a different broker.

She bought at a lower price.

She invested more money.

She invested earlier.

6.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

What was Lisa's return on investment (ROI) percentage?

160%

140%

120%

100%

7.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

How did Kim's investment strategy differ from Rick and Lisa's?

She used dollar cost averaging.

She invested all at once.

She did not invest at all.

She invested in a different stock.

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