1. An analyst estimates that a securitys intrinsic value is lower than its market value. The security...

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1. An analyst estimates that a security’s intrinsic value is lower than its market value.

The security appears to be:

A. Undervalued.
B. Fairly valued.
C. Overvalued.
2. A market in which assets’ market values are, on average, equal to or nearly equal to intrinsic values is best described as a market that is attractive for:
A. Active investment.
B. Passive investment.
C. Both active and passive investment.
3. Suppose that the future cash flows of an asset are accurately estimated. The asset trades in a market that you believe is highly efficient based on most evidence. But your intrinsic value estimate exceeds market value by a moderate amount. The most likely conclusion is that you have:
A. Overestimated the asset’s risk.
B. Underestimated the asset’s risk.
C. Identified a market inefficiency.

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Investments Principles Of Portfolio And Equity Analysis

ISBN: 9780470915806

1st Edition

Authors: Michael McMillan, Jerald E. Pinto, Wendy L. Pirie, Gerhard Van De Venter, Lawrence E. Kochard

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