You, in analyzing a stock, find that its expected return exceeds its required return.This suggests that you think
A) the stock should be sold.
B) the stock is a good buy.
C) management is probably not trying to maximize the price per share.
D) dividends are not likely to be declared.
E) the stock is experiencing supernormal growth.

Question

Quizplus · Accepted Answer

If the expected return exceeds the required return, it indicates that the stock is undervalued and has the potential to generate higher returns than what is required by the investor. Therefore, the stock can be considered a good buy.

You, in Analyzing a Stock, Find That Its Expected Return