Stock brokers must think in k-levels because:     They don’t know what companies are really up to.     They don’t know what the future will bring.     Their valuation of a company depends on uncertainty at the firm level.     Their valuation of a company depends on how others value that company.

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
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  1. Stock brokers must think in k-levels because:

     
    1.  

      They don’t know what companies are really up to.

       
    2.  

      They don’t know what the future will bring.

       
    3.  

      Their valuation of a company depends on uncertainty at the firm level.

       
    4.  

      Their valuation of a company depends on how others value that company.

       
       

 

Expert Solution
Step 1

A valuation tool called the K-value looks at how consistently an equity's return has increased over time. A value-added monthly index (VAMI), which employs linear regression to follow the development of a $1,000 initial investment in the securities under consideration, provided the information for the ratio.

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