Question

Managers are probably best qualified to predict when A. currency exchange rates are most favorable. B. a firm they wish to acquire is most undervalued. C. market interest rates are at their lowest point. D. interest rates are peaking. E. their company's stock is overvalued

Answer 1

Answer:

The correct answer is letter "E": their company's stock is overvalued.

Explanation:

When a company's stock is overvalued market analysts and investors may notice it sooner or later. Then, managers can expect the stock price to fall at a certain point. In the meantime, executives can identify the weaknesses and threats of the company after the stock price drops so when it happens the firm will have a contingency plan structured.

Thus, a stock overvaluation represents an opportunity for the company to get prepared for future downturns in its stock price.