Two Conditions Are Used to Determine Whether or Not a Stock

question 48

True/False

Two 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:

Listening

The active process of receiving, comprehending, and interpreting spoken or non-verbal messages.

Misinterpret

To understand or interpret something incorrectly, leading to a misunderstanding of the intended meaning.

Rightsizing

The process of adjusting the size of a company's workforce to its needs, aiming for optimal efficiency and productivity.

Layoff

The act of temporarily or permanently terminating employees, typically due to economic downturns or company restructurings.