- CFA Exams
- CFA Level I Exam
- Topic 5. Equity Investments
- Learning Module 8. Equity Valuation: Concepts and Basic Tools
- Subject 1. Estimated Value and Market Price
CFA Practice Question
If the estimated value exceeds the market price, the security is said to be ______.
B. undervalued
C. fairly valued
A. overvalued
B. undervalued
C. fairly valued
Correct Answer: B
User Contributed Comments 4
| User | Comment |
|---|---|
| gulfa99 | shouldnt this is A)overvalued? |
| aniketcpp | Estimation is generally in terms of Investors to invest the money.So if investor has estimated the price of any asset which is exceed then current market value,it means investor can put his money over that stock as it is currently undervalues and it price should increase in future. |
| birdperson | @gulfa99 -- intrinsic value (estimated value) > market = undervalued ... & vice versa |
| shaunak_g | Estimated is what the Investor thinks the value is and market price is the actual value. Eg. If an Investor is looking to buy a stock for $10(market value), and the investor thinks that this stock is undervalued(meaning the stock is not as expensive as it should be based on it's performance, economic conditions) and it would rise in the future. So at present the stock is undervalued. |