Average Cost Basis in Stock Purchases

This video tutorial explains how to calculate the average cost basis or average cost per share when making multiple stock purchases at different prices. It provides two examples: Robert's purchase of stock XYZ and Kim's purchase of stock ABC. The video demonstrates the formula for average cost, which is the total cost divided by the total number of shares. By buying more shares when prices drop, investors can reduce their average cost per share. The tutorial concludes with a call to action for viewers to like and subscribe.

What is the purpose of calculating the average cost basis for stocks?

• To calculate the dividend yield

• To find the average price paid per share

• To determine the total profit from stock sales

• To assess the stock's market value

How many shares did Robert purchase in total?

• 600 shares

• 500 shares

• 300 shares

• 200 shares

What was the total cost of Robert's stock purchases?

• $3,000

• $12,000

• $6,000

• $9,000

What is Robert's average cost per share after his purchases?

• $10

• $18

• $12

• $15

How does buying stocks at a lower price affect the average cost basis?

• It increases the average cost basis

• It decreases the average cost basis

• It has no effect on the average cost basis

• It doubles the average cost basis

How many shares did Kim purchase in her first transaction?

• 500 shares

• 1,000 shares

• 4,500 shares

• 3,000 shares

What was the total cost of Kim's stock purchases?

• $59,000

• $49,000

• $39,000

• $24,000

What is Kim's average cost per share after all her purchases?

• $10.89

• $15.00

• $20.00

• $8.00

What is the formula for calculating the average cost per share?

• Total cost divided by total number of shares

• Total shares divided by total cost

• Total revenue divided by total number of shares

• Total profit divided by total number of shares

What is the main takeaway from the video on calculating average cost basis?

• It helps in determining the market value of stocks

• It is useful for calculating dividends

• It allows investors to understand their average investment cost

• It is necessary for tax calculations