Financial Planner

Answer: D - The two methods for computing the basis of mutual funds is average basis and cost basis. Average basis focuses on total cost of shared owned divided by the total number of shares owned; this is done by two category methods. Single-category method is the average share computed using all shares regardless of whether they are held short or long term. Double-category method is the average basis per share computed in two categories, short and long term. Cost basis focuses on the actual cost of the mutual funds; this is done by specific identification and firs-in, first-out methods. Specific identification specifies the specific shares that are sold and receives written confirmation of the identification and sale form the broker. Firs-in, first-out is the selling of the older shares first.