Asked by Jaydan MacMaster on Apr 27, 2024
Verified
Many stock analysts assume that a mispriced stock will
A) immediately return to its intrinsic value.
B) return to its intrinsic value within a few days.
C) never return to its intrinsic value.
D) gradually approach its intrinsic value over several years.
E) None of the options are correct.
Intrinsic Value
The perceived or calculated true value of an asset, based on fundamental analysis, irrespective of its current market price.
Mispriced Stock
A stock that is selling for a price which does not accurately reflect its intrinsic value, either undervalued or overvalued.
- Identify factors influencing stock mispricing and the role of fundamental analysis in stock valuation.
Verified Answer
ZK
Zybrea KnightMay 03, 2024
Final Answer :
D
Explanation :
Stock prices tend to gradually adjust to their intrinsic values over time due to market participants reacting to new information and adjusting their valuations accordingly. This process is not immediate but unfolds over months or years as perceptions and realities align.
Learning Objectives
- Identify factors influencing stock mispricing and the role of fundamental analysis in stock valuation.
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