For a stock to be in equilibrium, two conditions are necessary: (1) The stock's market price must equal its intrinsic value as seen by the marginal investor and (2) the expected return as seen by the marginal investor must equal this investor's required return.

Question

Quizplus · Accepted Answer

This statement is true. Equilibrium is achieved when a stock's market price matches its intrinsic value and the expected return matches the required return of the marginal investor.

For a Stock to Be in Equilibrium, Two Conditions Are