Question

cial Environment 2. Stock prices and intrinsic values Aa Aa Benjamin Graham, the father of value investing, once said, "In the short run, the market is a voting machine, but in the long run, the market is a weighing machine." In this quote, Benjamin Graham was referring to the key difference between the "price" and the "value" of a security. In November 2006, Citigroup's stock (NYSE: C) was trading at $49.59. Following the credit crisis of 2007-2008 and by the end of October 2009, Citigroup's stock price had plummeted to $4.27. Several banks went under, and others saw their stock prices lose more than 60% of their value. Based on your understanding of stock prices and intrinsic values, which of the following statements is true? A stock's intrinsic value is based on true risk in the company. A stock's market price is based only on true investor returns. Which of the following describe the reason(s) why maximization of intrinsic stock value benefits society. Check all that apply. Successful companies hire more employees. Most investors prefer companies that can rise prices beyond reasonable levels. Successful companies can avoid raising external funds in the financial markets. Stock price maximization requires efficient, low-cost businesses.

Answer 1

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Answer:

1)

Explanation- Intrinsic value is the fair and actual value of the company. It is the value of business by taking together the tanglible and intangible factors. Intrinsic value and market values is different. Market value is determined on the basis of its current market price of stock.

Option A

2)

Maximizing the intrinsic value of a stock makes a firm to acquire more employees and also low-cost products or services can be more beneficial to the customers.

Hence options are 1 and 4