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jeopardy questions

# jeopardy questions - (8 Market price is the stock value...

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Kouros Vala Bus173A Group Ahuja 1.) What is the difference between a stock’s intrinsic value and a stock’s market price? 2.) What is meant by an “equilibrium” market when referring to stock prices? 3.) Should a firm’s manager’s estimate its intrinsic value or leave this estimation to outside security analysts? 4.) What is the difference between compound interest and simple interest? 5.) How do you calculate FVs and PVs? What are the formulas? 6.) When referring to YTMs, what are the three different types of rates? 7.) What are three different types of bonds and how do they differ? 8.) What kind of debt security does not have reinvestment risk?

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1.- Intrinsic value is an estimate of a stock’s “true” value based on accurate risk and return data. The intrinsic value can be estimated but not measured precisely.
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Unformatted text preview: (8)- Market price is the stock value based on perceived but possibly incorrect information as seen by the marginal investors. (10) 2.- The situation in which the actual market price equals the intrinsic value, so investors are indifferent between buying or selling a stock.- intrinsic value = stock price (10) 3. Intrinsic values are an estimate, and different analysts will have different estimate for the company at any given time. Its managers should also estimate their firm’s intrinsic value and then take and then take actions to maximize that value. (10) 4. - Compound interest occurs when interest is earned on prior periods’ interest.- Simple interest occurs when interest is not earned on interest. (27) 5. - Future Value = FVn = PV(1 + I)^n- Present Value = PVn = (FVn) / (1+ I)^n...
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jeopardy questions - (8 Market price is the stock value...

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