SIE Exam Question 861: Answer and Explanation

Question: 861

Assume that an investor wants to dollar cost average into Delta mutual fund by making quarterly purchases over a two-year period. If the total amount to be invested is $48,000, then how much will be invested each quarter if the fund's NAV increases by a total of 10% over the two-year period?

• A. $6,000
• B. $6,600
• C. $8,000
• D. $8,800

Correct Answer: A

Explanation:

$48,000 ÷ 8 quarters = $6,000 per quarter

With dollar cost averaging, a flat dollar amount is invested each period regardless of the underlying investment's performance.