You are comparing two companies, BestRest Corporation and Relaxin, Inc. The exports of both companies stand to

Question:

You are comparing two companies, BestRest and Relaxin, Inc. The exports of both companies stand to benefit substantially from the removal of import restrictions on their products in a large export market. The price of BestRest shares reflects a probability of 0.90 that the restrictions will be removed within the year. The price of Relaxin stock, however, reflects a 0.50 probability that the restrictions will be removed within that time frame. By all other information related to valuation, the two appear comparably valued. How would you characterize the implied probabilities reflected in share prices? Which stock is relatively overvalued compared to the other?
Stocks
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