Strategy Intermediate: Value Investing

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1.
Which of the following best suggests that the price of an undervalued stock may soon increase?
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A corporate takeover is imminent. An investor may expect the takeover announcement to push up the price of the undervalued stock.
2.
Which of the following is the least likely reason that a stock may be undervalued?
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Interest rates have fallen in the past year. Falling interest rates would make it easier for the company to borrow funds, grow, and increase earnings, which would likely result in an increase in the price of its stock.
3.
To evaluate a company, a value investor might look at _______.
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Its book value. A value investor would focus on factors intrinsic to the company to determine its likely future performance.
4.
There are reasons why a low price-to-book ratio may not be a good thing for investors. Which of the following is not one of those reasons?
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The company is earning a high return on its assets. This is actually a good thing for investors.
5.
A value stock is one that is undervalued in the marketplace.
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True. A value stock is worth more than its current market price indicates.