Explanation

When analyzing whether a security is undervalued, we compare its estimated intrinsic value with its market price:

1. Intrinsic Value: This is the true economic value of a security based on fundamental analysis, considering factors like future cash flows, growth prospects, risk, and other fundamental characteristics.

2. Market Price: This is the current price at which the security is trading in the market.

3. Undervaluation Condition: A security is considered undervalued when:

   • Intrinsic Value > Market Price → The security is worth more than what the market is currently pricing it at
   • This suggests a potential buying opportunity

4. Why the other options are incorrect:

   • Par Value (A): This is the face value of a bond or the nominal value of a stock, which is typically unrelated to valuation analysis.
   • Book Value (B): This is the accounting value of a company's equity (assets minus liabilities), which may differ significantly from intrinsic value due to accounting conventions, intangible assets, and market conditions.

5. Investment Implication: When intrinsic value exceeds market price, fundamental analysts would typically recommend buying the security, expecting the market price to eventually converge toward the intrinsic value.