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.

---

Definitions:

Adult Years

The period in human life after adolescence, typically marked by full physical development and maturity.

Factors

Elements or conditions that contribute to a particular result or situation, often studied to understand complex processes or outcomes.

Alleviate Effects

The process of reducing the severity or intensity of negative outcomes or impacts.

Stress

A physical or emotional reaction to challenging or demanding circumstances.