If the Price-Earnings Ratio Is 8 Times, the Earnings Yield

question 12

Multiple Choice

If the price-earnings ratio is 8 times, the earnings yield is:

• A) 12.5%.
• B) 8%.
• C) 80%.
• D) 10%.

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Definitions:

Face Value

The nominal value printed on a financial instrument such as a bond or stock certificate, representing its legal value.

Semiannually

Occurring twice a year or every six months.

Bond Premium

The amount by which the market value of a bond exceeds its principal amount or par value, typically occurring when the bond's interest rate is higher than current market rates.

Straight-Line Method

A depreciation method that allocates an equal portion of the cost of a fixed asset to each accounting period over its useful life.