CFA Practice Question

There are 191 practice questions for this study session.

CFA Practice Question

If an asset seems to be undervalued relative to a comparison asset or group of assets, the asset ______

I. is expected to outperform the comparison asset or assets on a relative basis.
II. may be undervalued.
III. may be overvalued.
A. I and II
B. I and III
C. I, II and III
Explanation: The word "relative" is necessary. The asset may be overvalued on an absolute basis if the comparison asset or assets themselves are not efficiently priced.

User Contributed Comments 7

User Comment
shival tricky question
toto123 still doesnt make sense
at0899 pretty obvious why its I but the key to this is the "relative" basis so while it may look cheap compared to its peers, this stock could be overvalued on an absolute basis. i.e. tech bubble 1999.
Sam123456 Very good clarification, at.
birdperson in the words of Kevin Garnett, "ANYTHING IS POSSIBLE!!!"
ascruggs92 The asset "seems" to be undervalued "relative" to a comparison group. The language used to makes it clear that the value being place on this asset is subjective. For that reason, all three answers provided are distinct possibilities.
pires100 birdperson, thank you I needed that! haha
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