CFA Practice Question

There are 275 practice questions for this study session.

CFA Practice Question

In an inefficient market, if an asset's intrinsic value is estimated to be $10 while the market price is $12, the asset appears to be ______.
A. overvalued
B. undervalued
C. uncertain
Explanation: This is because the market is inefficient and the intrinsic value is not a good estimate of the market value of the asset.

User Contributed Comments 9

User Comment
gjk2103 so...if we had the assumption of an efficient market instead of an ineffecient market, would the intrinsic value indicate that the stock is overvalued?
bidisha Yup
gill15 Tricked me..nice Q...
davcer inefficient. in an efficient mkt if intrinsic<mkt then the asset is overvalued
tichas Nice question
praj24 Well....pissed all over my parade
CJPerugini When you read the question too fast ....
Noblebao key word is inefficient market
Patdotcom In an efficient market, those values should be similar. So I understood that it was the inefficience of the market that created the possibility of overstimation or understimation..
You need to log in first to add your comment.