{"id":55329,"date":"2024-04-16T00:25:31","date_gmt":"2024-04-16T00:25:31","guid":{"rendered":"https:\/\/exam.pscnotes.com\/mcq\/?p=55329"},"modified":"2024-04-16T00:25:31","modified_gmt":"2024-04-16T00:25:31","slug":"if-the-intrinsic-value-of-a-share-is-less-than-the-market-price-which-of-the-most-reasonable","status":"publish","type":"post","link":"https:\/\/exam.pscnotes.com\/mcq\/if-the-intrinsic-value-of-a-share-is-less-than-the-market-price-which-of-the-most-reasonable\/","title":{"rendered":"If the intrinsic value of a share is less than the market price, which of the most reasonable?"},"content":{"rendered":"<p>\r\n    <!-- Check if it's an AMP page -->\r\n            <!-- Non-AMP version -->\r\n        <div class=\"mcq-container\" data-quiz-id=\"quizState_6a97df0b3677e\">\r\n                                            <div class=\"option\" data-option-key=\"option1\" data-is-correct=\"false\">\r\n                    That shares have lesser degree of risk                <\/div>\r\n                                            <div class=\"option\" data-option-key=\"option2\" data-is-correct=\"false\">\r\n                    That market is over valuing the shares                <\/div>\r\n                                            <div class=\"option\" data-option-key=\"option3\" data-is-correct=\"false\">\r\n                    That the company is high dividend paying                <\/div>\r\n                                            <div class=\"option\" data-option-key=\"option4\" data-is-correct=\"true\">\r\n                    That market is undervaluing the share                <\/div>\r\n                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            \r\n            <!-- Feedback messages for non-AMP -->\r\n            <div class=\"feedback\" data-feedback=\"wrong\">Answer is Right!<\/div>\r\n            <div class=\"feedback\" data-feedback=\"right\">Answer is Wrong!<\/div>\r\n        <\/div>\r\n\r\n        <script>\r\n        document.addEventListener('DOMContentLoaded', function () {\r\n            var containers = document.querySelectorAll('.mcq-container');\r\n\r\n            containers.forEach(function(container) {\r\n                var options = container.querySelectorAll('.option');\r\n                var feedbackSelect = container.querySelector('[data-feedback=\"select\"]');\r\n                var feedbackWrong = container.querySelector('[data-feedback=\"wrong\"]');\r\n                var feedbackRight = container.querySelector('[data-feedback=\"right\"]');\r\n\r\n                options.forEach(function(option) {\r\n                    option.addEventListener('click', function() {\r\n                        var selectedOption = option.getAttribute('data-option-key');\r\n                        var isCorrect = option.getAttribute('data-is-correct') === 'true';\r\n\r\n                        \/\/ Remove previous selections\r\n                        options.forEach(function(opt) {\r\n                            opt.classList.remove('correct', 'incorrect');\r\n                        });\r\n\r\n                        \/\/ Add the correct\/incorrect class\r\n                        if (isCorrect) {\r\n                            option.classList.add('correct');\r\n                            feedbackRight.hidden = false;\r\n                            feedbackWrong.hidden = true;\r\n                        } else {\r\n                            option.classList.add('incorrect');\r\n                            feedbackRight.hidden = true;\r\n                            feedbackWrong.hidden = false;\r\n                        }\r\n\r\n                        \/\/ Hide select feedback\r\n                        feedbackSelect.hidden = true;\r\n                    });\r\n                });\r\n            });\r\n        });\r\n        <\/script>\r\n    \r\n    <!--more--><\/p>\n<p>The correct answer is D. That market is undervaluing the share.<\/p>\n<p>The intrinsic value of a share is the theoretical price that a share should trade at, based on its fundamental factors such as its earnings, assets, and cash flow. The market price of a share is the price that a share is actually trading at in the market. If the intrinsic value of a share is less than the market price, it means that the market is overvaluing the share. This can happen for a number of reasons, such as if the market is optimistic about the company&#8217;s future prospects or if there is a shortage of shares available to trade.<\/p>\n<p>Option A is incorrect because the degree of risk of a share is not related to its intrinsic value. A share with a high degree of risk can still have a high intrinsic value if it has the potential to generate high returns.<\/p>\n<p>Option B is incorrect because the market is not always rational. The market can overvalue or undervalue shares for a variety of reasons, such as investor sentiment or technical factors.<\/p>\n<p>Option C is incorrect because a high dividend paying company does not necessarily have a high intrinsic value. A company can pay a high dividend even if it is not generating enough cash flow to cover the dividend.<\/p>\n<p>Therefore, the correct answer is D. That market is undervaluing the share.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Join Our Telegram Channel Subscribe on YouTube<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[945],"tags":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v22.2 (Yoast SEO v23.3) - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>If the intrinsic value of a share is less than the market price, which of the most reasonable?<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/exam.pscnotes.com\/mcq\/if-the-intrinsic-value-of-a-share-is-less-than-the-market-price-which-of-the-most-reasonable\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" 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