Scenario 1 Security analysis is the process of evaluating the value of a security, such as a
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Question:
Scenario
Security analysis is the process of evaluating the value of a security, such as a stock, bond, or option.
It is used by investors to make decisions about whether to buy, sell, or hold a particular security.
There are two main types of security analysis: fundamental analysis and technical analysis.
Fundamental analysis is the process of analyzing a company's financial statements and other
fundamental data to assess its intrinsic value. It is based on the belief that the value of a company's
stock is ultimately determined by its longterm financial performance. Fundamental analysts
typically focus on factors such as a company's earnings, revenue, debt, and cash flow. They also
consider the company's industry, competitive landscape, and management team.
Technical analysis is the process of studying past price and volume data to identify trends and
patterns that can be used to predict future price movements. It is based on the belief that the
market is efficient, and that all relevant information is reflected in the price of a security. Technical
analysts typically use charts and indicators to identify support and resistance levels, trends, and
momentum.
Both fundamental analysis and technical analysis can be used to make profitable investment
decisions. However, they are different approaches with different strengths and weaknesses.
Fundamental analysis is better suited for longterm investors who are interested in holding a
security for the long term. Technical analysis is better suited for shortterm traders who are
interested in making quick profits.
You are Required to:
Question
a Analyze historical stock prices, identify patterns, construct moving averages, and utilize
technical indicators to recommend an investment decision.
b Provide justifications on the investment decisions in light of Efficient Market Hypothesis.
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