The estimated value of a company's stock is less than the current market value of the company. The appropriate investment decision should be to:
A) buy the company's stock.
B) hold the company's stock.
C) sell the company's stock.
D) purchase the bond's that the company has issued.

Question

Quizplus · Accepted Answer

If the estimated value of a company's stock is less than the current market value, it means that the stock is overpriced and the market is not accurately reflecting the company's true value. Therefore, it is likely that the stock will eventually decrease in price to its true value. This presents a selling opportunity to capitalize on the overpriced stock before it falls in value. Holding the stock carries the risk of losing money if the market eventually corrects itself. Buying the stock would be a risky decision as it is overvalued, and purchasing the company's bonds would not necessarily be the best investment decision as it does not address the issue of the overpriced stock.

The Estimated Value of a Company's Stock Is Less Than