Shares of a corporation
which give the shareholder a right to vote on
matters pertaining to the corporation. A
corporation may have voting and non-voting stock.
The right to purchase shares from
the issuing entity, at a set price, usually for a
specified period of time.
A wash trade is the activity of buying and selling the same
investment in a short period of time (usually on the same day), with no change in beneficial
ownership. Wash trades are illegal when they are done to
artificially inflate the trading volume or market value of a stock.
Weighted average cost
When an investor purchases
shares in certain mutual funds on more than one occasion, the weighted
average cost can be used as the cost basis when calculated gain or
loss on sale. Weighted
average cost per share is calculated as the total cost of all the
shares divided by the total number of shares purchased.
Example: Investor A purchased shares of Mutual Fund A on three
Jan 15th - 100 shares @$20 each plus
$29 commission = $2,029
Feb 10th - 200 shares @$18 each plus
$29 commission = $3,629
Feb 17th - 100 shares @$19 each plus
$29 commission = $1,929
Total cost = $7,587, divided by total shares (400) =
weighted average cost of $18.9675/share.
If the investor subsequently sells 100 shares, then the cost basis
allocated to the sold shares (for tax purposes) would be $18.9675 x
100, = $1,896.75. The cost basis of the remaining 300 shares
would be $7,587 - $1,896.75 = $5,690.25.
Except for certain mutual fund shares, the average
price per share cannot be used to calculate gains or losses on the
sale of stock.
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