Analysts often use a ________% rule in security valuation in recognition of the fact that estimating a security's value is an inexact process.
A)5
B)10
C)15
D)20

Question

Quizplus · Accepted Answer

The 15% rule helps analysts account for the fact that estimating a security's true value is challenging and involves many assumptions. The rule states that analysts should expect their valuations to be off by up to 15% due to these uncertainties. Therefore, when making investment decisions based on valuation, analysts should ensure there is a sufficient margin of safety (i.e., the security should be undervalued by more than 15%) to account for this potential error.

Analysts Often Use a ________% Rule in Security Valuation in Recognition