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Basic Question 1 of 3

If the estimated value exceeds the market price, the security is said to be ______.

A. overvalued
B. undervalued
C. fairly valued

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.
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Edward Liu

Edward Liu

Learning Outcome Statements

evaluate whether a security, given its current market price and a value estimate, is overvalued, fairly valued, or undervalued by the market

describe major categories of equity valuation models

CFA® 2024 Level I Curriculum, Volume 3, Module 8.