Mr. bobby brought 50 shares at $60 and 2 months letter purchased 25 share a $56 at what price should he purchased 25 additional share in order to have an average price$58 per share
Answer :$56.
To find out at what price Mr. Bobby should purchase 25 additional shares to have an average price of $58 per share, we can use the concept of weighted average.
Step 1: Calculate the total cost of his initial 50 shares.
Total cost of initial shares = Number of shares * Price per share
Total cost of initial shares = 50 * $60 = $3000
Step 2: Calculate the total cost of his next 25 shares.
Total cost of next 25 shares = Number of shares * Price per share
Total cost of next 25 shares = 25 * $56 = $1400
Step 3: Calculate the total cost of all 75 shares.
Total cost of all shares = Total cost of initial shares + Total cost of next 25 shares
Total cost of all shares = $3000 + $1400 = $4400
Step 4: Calculate the desired total cost for 75 shares.
Desired total cost of all shares = 75 shares * $58 average price per share
Desired total cost of all shares = 75 * $58 = $4350
Step 5: Calculate the remaining cost that needs to be spent on the additional 25 shares.
Remaining cost = Desired total cost - Current total cost
Remaining cost = $4350 - $4400 = -$50
Since the remaining cost is negative, it means Mr. Bobby has already spent more than the desired total cost. Therefore, he does not need to purchase additional shares to achieve an average price of $58 per share.
To determine the price at which Mr. Bobby should purchase the additional 25 shares in order to have an average price of $58 per share, we can use the concept of weighted averages.
Let's calculate the current total cost of Mr. Bobby's shares:
50 shares were bought at $60 each, so the cost of the initial purchase was 50 * $60 = $3000.
25 shares were bought at $56 each, so the cost of the second purchase was 25 * $56 = $1400.
Therefore, the total cost of Mr. Bobby's current shares is $3000 + $1400 = $4400.
Now, let's calculate the total number of shares Mr. Bobby currently owns:
Initially, he bought 50 shares, and later he purchased 25 additional shares. So, the total number of shares he owns is 50 + 25 = 75 shares.
To have an average price of $58 per share, we need to find the additional cost required to reach the desired average price. The formula for this calculation is:
Total cost = (Current total cost + Additional cost) / Total number of shares
Plug in the known values:
$4400 + Additional cost = $58 * 75
Simplifying the equation:
$4400 + Additional cost = $4350
Subtract $4400 from both sides:
Additional cost = $4350 - $4400 = -$50
The resulting negative value indicates that Mr. Bobby has already surpassed the desired average price of $58 per share. Therefore, he does not need to purchase any additional shares to reach the desired average price.
Just calculate the values of the individual purchases, and the desired total:
50*60 + 25*56 + 25x = 58(50+25+x)