Conditions Are Used to Determine Whether or Not a Stock

question 45

True/False

conditions are used to determine whether or not a stock is in equilibrium: (1) Does the stock's market price equal its intrinsic value as seen by the marginal investor, and (2) does the expected return on the stock as seen by the marginal investor equal this investor's required return? If either of these conditions, but not necessarily both, holds, then the stock is said to be in equilibrium.

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Definitions:

Two-tailed Hypothesis

A hypothesis test that considers both directions of an effect, allowing for the possibility of difference in either direction from the null hypothesis.

Critical Values

Specific points on the scale of a test statistic beyond which we reject the null hypothesis, crucial in hypothesis testing to determine the significance of the results.

Critical Value

A threshold in a statistical test that defines the boundary for rejecting the null hypothesis.

Critical Value

A threshold value used in hypothesis testing that defines the boundary between the region where the null hypothesis is rejected and the region where it is not rejected.