Multiple Choice
During the 1920s, more people began to acquire shares of stock using which of the following methods?
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7. Receivables and Investments
Introduction to Investments in Securities
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Due to speculation, stock prices:
A
decrease steadily over time
B
remain stable and reflect only the company's book value
C
may fluctuate significantly, often deviating from their intrinsic value
D
are always determined solely by government regulation
Verified step by step guidance1
Understand the concept of stock prices: Stock prices represent the market value of a company's shares and are influenced by various factors, including market speculation, investor sentiment, and company performance.
Recognize the role of speculation: Speculation refers to the act of trading stocks based on predictions or expectations about future price movements, rather than intrinsic value or fundamental analysis.
Analyze the impact of speculation on stock prices: Speculation can lead to significant fluctuations in stock prices, causing them to deviate from their intrinsic value, which is based on the company's actual financial performance and fundamentals.
Differentiate intrinsic value from market value: Intrinsic value is calculated using financial metrics such as earnings, assets, and liabilities, while market value is determined by supply and demand dynamics in the stock market.
Conclude that stock prices may fluctuate significantly due to speculation, and they are not solely determined by government regulation, nor do they remain stable or reflect only the company's book value.
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