The process of fundamental analysis establishes whether the share is trading at a:

A) price level consistent and relevant to the appropriate index
B) historic level compared to the overall market
C) discount, true value or premium
D) market price that is affordable

Question

The process of fundamental analysis establishes whether the share is trading at a:

A) price level consistent and relevant to the appropriate index
B) historic level compared to the overall market
C) discount, true value or premium
D) market price that is affordable

Quizplus · Accepted Answer

The intrinsic value (or fundamental value)is established by applying a model (such as one of the models described in Chapter 11)to the share.The intrinsic value is then compared with the current market value of the share and the investment decision is based on a comparison between the intrinsic (or fundamental value)and the current market price.This process establishes whether the share is trading at a discount,true value or premium.

The Process of Fundamental Analysis Establishes Whether the Share Is