Average Price is a method used to determine the average price paid by an investor for a security that has been purchased at different times and prices such as through dollar cost averaging. An investor’s average price is determined by using the following formula:
Average Price = Total of purchase prices / The number of purchases
Applying "Average Price" to Securities Exams:
The desirable outcome for an investor who uses dollar cost averaging is that over time his average cost will be lower than the average selling price.