Choose wisely. There is only one correct answer to each question.
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1.
Relative-value managers _______.
Buy stocks trading below their historical price ratios, their industry peers, or the market. Relative-value managers measure a stock's value by comparing its price ratios with some benchmark.
2.
Value fund managers buy stocks that they believe are undervalued, _______.
But they also define value in different ways. And partly because they define value in different ways, they tend to use differing strategies when choosing stocks.
3.
Relative-value managers measure a stock's value by comparing its price ratios with _______.
A benchmark. These managers use a benchmark of some kind for comparison purposes.
4.
Absolute-value managers _______.
Buy stocks that are cheaper than what they deem to be the company's entire worth. Managers practicing absolute-value strategies calculate what a company is worth in absolute terms and will only buy the company's stock for less than that figure.
5.
If a stock is 'fairly valued,' what does that mean?
The stock is no longer cheap by whatever benchmark the manager uses. The other answers might apply to relative-value managers or absolute-value managers, who would use either relative or absolute benchmarks.
