An Inconsistency Between a Stock's P/E Ratio and Growth Rate

question 3

Multiple Choice

An inconsistency between a stock's P/E ratio and growth rate can be attributed to all of the following,except

• A) A major difference in the risk involved.
• B) Inaccurate growth estimates.
• C) An undervaluation of the stock.
• D) An overvaluation of the stock.
• E) Competition.

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Definitions:

Trade Settlement

The process of transferring securities from the seller to the buyer and the corresponding payment from the buyer to the seller.

Required Return

The minimum expected return on an investment necessary for an investor to consider making that investment, considering its risk.

Inflation Rate

The rate at which the general level of prices for goods and services is rising, and, subsequently, purchasing power is falling, commonly measured by the Consumer Price Index (CPI).

Counterparty

The other organization or party involved in a financial transaction.