Companies a and B Are Both in the Same Industry

question 114

Multiple Choice

Companies A and B are both in the same industry and generally compete against each other in the marketplace. Stock A has a P/E ratio of 15 while Stock B's P/E is 21. Which of the following is not true about the relative positioning of Stock A and Stock B?

• A) Stock B has lower perceived risk.
• B) Investors are willing to pay a higher price for shares in Company B.
• C) Company A's business performance is probably not as strong as Company B's performance.
• D) All of the statements are correct.

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Definitions:

Appearance-reality Distinction

The cognitive ability to differentiate between how objects appear and their true properties or reality.

Recalling

The cognitive process of bringing stored information back into conscious awareness.

Random Events

Incidents or occurrences that happen without a predictable pattern or plan.

Retrieval Cues

Stimuli or signals that help in the recovery of memories stored in the brain, making it easier to retrieve information when needed.