For a Stock to Be in Equilibrium, Two Conditions Are

question 63

True/False

For a stock to be in equilibrium, two conditions are necessary: (1)The stock's market price must equal its intrinsic value as seen by the marginal investor and (2)the expected return as seen by the marginal investor must equal this investor's required return.

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Definitions:

Present Values

The current value of a future amount of money or stream of cash flows given a specified rate of return.

Annuities

Financial products that provide a series of payments over time, often used for retirement savings or income generation.

Compute

To calculate or solve a problem, often using a computer.

Compounded Quarterly

Refers to the calculation of interest on the initial principal and also on the accumulated interest of previous periods of a deposit or loan, performed four times a year.