You wish to earn a return of 11% on each of two stocks,C and
A)will be greater than the intrinsic value of stock D
B)will be the same as the intrinsic value of stock D
C)will be less than the intrinsic value of stock D
D)A or B
E)none of the above is a correct answer.

Question

Quizplus · Accepted Answer

In order to earn a return of 11%, the investor may have to purchase stocks at a price that is less than its intrinsic value. Hence, it is likely that the intrinsic value of stock D is higher than what the investor is willing to pay for it to earn a return of 11%. Therefore, the intrinsic value of stock D is more than what the investor is willing to pay, indicating that the answer is option C.

You Wish to Earn a Return of 11% on Each