- CFA Exams
- CFA Level I Exam
- Topic 5. Equity Investments
- Learning Module 3. Market Efficiency
- Subject 1. The Concept of Market Efficiency
CFA Practice Question
In an efficient market, if an asset's intrinsic value is estimated to be $10 while the market price is $12, the asset appears to be ______.
B. undervalued
C. uncertain
A. overvalued
B. undervalued
C. uncertain
Correct Answer: A
In such a market the market price should be very similar to the intrinsic value.
User Contributed Comments 2
| User | Comment |
|---|---|
| johntan1979 | But what if the intrinsic value estimation is wrong? Since in an efficient market, the price reflects all information available, then market price should be the real deal, no? |
| johntan1979 | Ok, ignore my comment. Just read that intrinsic is the real deal, the TRUE, ACTUAL value, no matter efficient or inefficient market. |