Final answer:
The statement that a stock with a market price above its intrinsic value is undervalued is false. A stock is considered undervalued if it trades below its intrinsic value, suggesting a potential for future price increases. Recognizing the difference between market price and intrinsic value is key in making investment decisions.
Step-by-step explanation:
If a stock's market price is above its intrinsic value, then the assertion that the stock is undervalued is incorrect. The statement 'If a stock's market price is above its intrinsic value, then the stock can be thought of as being undervalued, and it would be a good buy.' would be false. In financial investing, a stock is considered undervalued if its market price is below its intrinsic value, suggesting that the stock may be a good buy due to its potential for price increase. The idea behind this is to seek out stocks where current expectations (and thus prices) are low, but the company has strong potential to perform well in the future, possibly leading to a re-evaluation of the stock's worth and an increase in its market price.
Investors expect a rate of return on their investment, which can come from dividends or from capital gains. A capital gain is realized when a stock is sold for more than its purchase price. Understanding the relationship between market price, intrinsic value, and investor expectations is essential when evaluating whether a stock is a good investment opportunity.