What is the value of a security? What is the price of a security? How are security value and price linked with each other?
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Value of security is true value of security considering the various factors. It is different from price of security. It is the value derived by taking into account discounted value of future cash flows that security would generate. This income may be in the form of earnings and dividends or interest. Security value can be calculated using various models available for security valuation.
Price of security is price at which buyers and sellers are dealing in the market and it is different from value of security. Price of security may be undervalued or overvalued from the value of security. It is based on various factors such as market conditions, demand supply of security, etc. Market value or price of security is not truely indicative of actual valuation of security.
What is the value of a security? What is the price of a security? How are...