CS Executive · Corporate Accounting and Financial Management · Security Analysis
In security analysis, fundamental analysis primarily seeks to determine which of the following?
Fundamental analysis aims to estimate a security's intrinsic value by studying economic, industry and company-level factors. The estimate is compared with market price to judge whether the security is under- or overvalued. Using only past price patterns is technical analysis, not fundamental analysis.
- AThe intrinsic value of a security based on economic, industry and company factorsCorrect
- BThe future price of a security based only on past price charts
- CThe correlation of a security's returns with those of a bond index
- DThe number of shares that can be traded on a stock exchange in a day
Explanation
Fundamental analysis studies the economy, the industry and the company's financials to estimate intrinsic value, which is then compared with market price. Studying only past price charts is technical analysis, so that option is wrong.
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