The relationship between the value and price of a stock suggests that:
A) the equilibrium price of a stock strikes a balance between those who think the stock is worth more and those who think it's worth less at the current price.
B) it is the market's best guess regarding the expected value of the company's future profits.
C) stocks are overvalued.
D) both A and B are true.

Question

Quizplus · Accepted Answer

The relationship between the value and price of a stock suggests that the equilibrium price of a stock strikes a balance between those who think the stock is worth more and those who think it's worth less at the current price. Additionally, it is the market's best guess regarding the expected value of the company's future profits. Both A and B are true. Therefore, choice D is the correct answer.

The Relationship Between the Value and Price of a Stock