How do investors account for risk when determining an asset

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Tesla's stock price was up about 5% in Monday's trading after announcing the previous week that the automaker had delivered a record number of its Model 3 sedan and its Model Y SUV in the first quarter of 2021. Production of the Tesla Models S and X were halted with no explanation during the first quarter. Most experts attribute the lack of production of those models to the computer chip shortages plaguing many assembly lines.

Tesla has been down about 20% from its high of $883.09 posted earlier this year. The Wall Street darling started trending lower after releasing fourth quarter 2020 results that fell below analysts' forecasts. However, the first quarter 2021 results changed some minds on Wall Street with many analysts upgrading their recommendations on the firm's stock. Tesla closed just below $700 a share on April 5, 2021.

Problem 1: Why did Tesla's stock price increase on Monday April 5, 2021?

Problem 2: How do investors account for risk when determining an asset's value?

Problem 3: How does higher expected growth affect a stock's value?

Reference no: EM133000639

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