Chad believes that the stock for the Marvelous Marble Company is under

QUESTION

Chad believes that the stock for the Marvelous Marble Company is underpriced. He expects that children are going to love playing with marbles soon and decides to buy a large amount of Marvelous stock.

What helped Chad determine that the stock is underpriced?
A) The stock’s book value is close to the market value.
B) The stock’s par value is less than the market value.
C) The stock’s par value is higher than the book value.
D) The stock’s book value is higher than the par value.
E) The stock’s par value and market value are equal.

ANSWER

Answer: A
Explanation: A) When a stock’s market value falls to near its book value, some investors think the stock is underpriced and it is a good time to buy.