The intrinsic value of a company's stock, also known as its fundamental value, refers to the stock's "true" value based on accurate risk and return data. The value perceived by stock market investors determines the market price of a stock. A stock trading at a price below its intrinsic value is considered to be undervalued. A stock trading at a price above its intrinsic value is considered to be overvalued. Which of the following statements best describes a marginal investor? A marginal investor thinks that the firm's stock is priced too high, and she would only buy more stock if the price dropped sharply. O A marginal investor would buy more stock if the price fell slightly, would sell stock if the price rose slightly, and would maintain her current holding unless something were to change. A marginal investor thinks that the firm's stock at the current price is a good deal, and she would buy more stock if she had more money to invest. An analyst with a leading investment bank tracks the stock of Mandalays Inc. According to her estimations, the value of Mandalays Inc's stock should be $8.79 per share, but Mandalays Inc.'s stock is trading at $1.59 per share on the New York Stock Exchange (NYSE). Considering the analyst's expectations, the stock is currently: O Undervalued O In equilibrium Overvalued
The intrinsic value of a company's stock, also known as its fundamental value, refers to the stock's "true" value based on accurate risk and return data. The value perceived by stock market investors determines the market price of a stock. A stock trading at a price below its intrinsic value is considered to be undervalued. A stock trading at a price above its intrinsic value is considered to be overvalued. Which of the following statements best describes a marginal investor? A marginal investor thinks that the firm's stock is priced too high, and she would only buy more stock if the price dropped sharply. O A marginal investor would buy more stock if the price fell slightly, would sell stock if the price rose slightly, and would maintain her current holding unless something were to change. A marginal investor thinks that the firm's stock at the current price is a good deal, and she would buy more stock if she had more money to invest. An analyst with a leading investment bank tracks the stock of Mandalays Inc. According to her estimations, the value of Mandalays Inc's stock should be $8.79 per share, but Mandalays Inc.'s stock is trading at $1.59 per share on the New York Stock Exchange (NYSE). Considering the analyst's expectations, the stock is currently: O Undervalued O In equilibrium Overvalued
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:5. Intrinsic values and stock prices
The intrinsic value of a company's stock, also known as its fundamental value, refers to the stock's "true" value based on accurate risk and return
data. The value perceived by stock market investors determines the market price of a stock.
A stock trading at a price below its intrinsic value is considered to be undervalued. A stock trading at a price above its intrinsic value is considered to
be overvalued.
Which of the following statements best describes a marginal investor?
O A marginal investor thinks that the firm's stock is priced too high, and she would only buy more stock if the price dropped sharply.
O A marginal investor would buy more stock if the price fell slightly, would sell stock if the price rose slightly, and would maintain her
current holding unless something were to change.
O A marginal investor thinks that the firm's stock at the current price is a good deal, and she would buy more stock if she had more money
to invest.
An analyst with a leading investment bank tracks the stock of Mandalays Inc. According to her estimations, the value of Mandalays Inc.'s stock should
be $8.79 per share, but Mandalays Inc.'s stock is trading at $1.59 per share on the New York Stock Exchange (NYSE). Considering the analyst's
expectations, the stock is currently:
O Undervalued
O In equilibrium
O Overvalued
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