B Distinguish between market value and intrinsic value.

Question 1

Market Value

Answer 1

the value determined by
traders in the market.

An asset’s market value is the price at which it can currently be bought or sold.

The measure of an asset’s value that can most likely be determined without estimation is its: Market Value: The current price of a traded asset is its market value. An asset’s intrinsic or fundamental value is the price a rational investor with complete information about the asset would pay for it.

Question 2

Intrinsic value (fundamental value)

Answer 2

is the
value that everyone would agree upon if
everyone where fully informed and
everyone agreed upon the proper
methods to value securities.
– Intrinsic values change when new
(unexpected) information arrives.

When prices are efficient, market value and intrinsic value are very close.

An asset’s intrinsic value is the price that investors with full knowledge of the asset’s characteristics would place on the asset.

The value of an asset that a rational investor with full knowledge about the asset’s characteristics would willingly pay is best described as the asset’s:Intrinsic value is the price a rational investor with full knowledge about an asset’s characteristics would willingly pay for the asset.

A stock is said to be undervalued if its market price is: A security with a market price less than its intrinsic value is undervalued.