A "Fairly-Priced" Asset Lies

question 62

Multiple Choice

A "fairly-priced" asset lies

• A)above the security-market line.
• B)on the security-market line.
• C)on the capital-market line.
• D)above the capital-market line.

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Definitions:

Price/Earnings Ratio

A valuation metric that compares a company's current share price to its per-share earnings, used to evaluate if a stock is over or under-valued.

Market Value Added

A calculation that shows the difference between the market value of a company and its capitalized value on the balance sheet.

EBITDA Coverage Ratio

A financial ratio that measures a company's ability to pay off its incurred debt, calculated by dividing EBITDA by total debt service costs.

Debt Ratio

A financial ratio that measures the proportion of a company's total debt to its total assets, indicating the degree of leverage and financial risk.