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14. Using fundamental analysis, if intrinsic value is greater than the market price per share (IV>MPPS) what decisions should be made by the following parties? Buyer а. Buy b. Buy c. Do not buy d. Do not buy Seller Sell Hold Hold Sel

14. Using fundamental analysis, if intrinsic value is greater than the market price per share (IV>MPPS) what decisions should be made by the following parties? Buyer а. Buy b. Buy c. Do not buy d. Do not buy Seller Sell Hold Hold Sel

Essentials Of Investments
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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### Understanding Investment Decisions Based on Intrinsic Value **Question 14: Using fundamental analysis, if intrinsic value is greater than the market price per share (IV > MPPS), what decisions should be made by the following parties?** **Options:** | Buyer Decision | Seller Decision | |----------------|-----------------| | a. Buy | Sell | | b. Buy | Hold | | c. Do not buy | Hold | | d. Do not buy | Sell | In fundamental analysis, the intrinsic value of a stock is a measure of its inherent worth, as opposed to its net asset value or market value. When the intrinsic value is greater than the market price per share, it typically suggests that the stock is undervalued. Here's how this might influence decision-making: - **For Buyers:** - **Buy**: Since the intrinsic value exceeds the market price, it indicates a potentially profitable investment opportunity. - **For Sellers:** - Decisions might vary based on individual strategy. A seller might: - **Hold**: Believing the stock value may increase after market realization of its undervaluation. - **Sell**: If they prioritize immediate returns or have alternative investment options. The correct course of action will depend on each party’s risk tolerance, investment strategy, and market conditions.
Transcribed Image Text:### Understanding Investment Decisions Based on Intrinsic Value **Question 14: Using fundamental analysis, if intrinsic value is greater than the market price per share (IV > MPPS), what decisions should be made by the following parties?** **Options:** | Buyer Decision | Seller Decision | |----------------|-----------------| | a. Buy | Sell | | b. Buy | Hold | | c. Do not buy | Hold | | d. Do not buy | Sell | In fundamental analysis, the intrinsic value of a stock is a measure of its inherent worth, as opposed to its net asset value or market value. When the intrinsic value is greater than the market price per share, it typically suggests that the stock is undervalued. Here's how this might influence decision-making: - **For Buyers:** - **Buy**: Since the intrinsic value exceeds the market price, it indicates a potentially profitable investment opportunity. - **For Sellers:** - Decisions might vary based on individual strategy. A seller might: - **Hold**: Believing the stock value may increase after market realization of its undervaluation. - **Sell**: If they prioritize immediate returns or have alternative investment options. The correct course of action will depend on each party’s risk tolerance, investment strategy, and market conditions.
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