Question

true or false

In an efficient market, economic theory tells us that the intrinsic value and the market price of a stock are the same. In the U.S. we have a relatively efficient market.

A corporation that issues a callable bond may decide to call it's bond if interest rates fall by the call date. The bond holder would receive a premium for the bond from the issuer if it is called before the maturity date of the bond

n an efficient market, economic theory tells us that the intrinsic value and the market price of a stock are the same. In the U.S. we have a relatively efficient market.

Each stock's rate of return in a given year consists of a dividend yield (which might be zero) plus a capital gains yield (which could be positive, negative, or zero).  Such returns are calculated for all the stocks in the S&P 500.  A simple average of those returns (which gives equal weight to each company in the S&P 500) is then calculated.  That average is called the “return on the S&P Index,” and it is often used as an indicator of the “return on the market.

Answer 1

a) True. In a relatively efficient market, intrinsic value and market price are very similar on most occasions.

b) True. In most cases, the bond holder would receive a premium.

c) False. The weights of each stock in S&P500 is different and not equal.