According to Peter Lynch,a Rough Rule of Thumb for Security

question 40

Multiple Choice

According to Peter Lynch,a rough rule of thumb for security analysis is that

• A) the growth rate should be equal to the plowback rate.
• B) the growth rate should be equal to the dividend payout rate.
• C) the growth rate should be low for emerging industries.
• D) the growth rate should be equal to the P/E ratio.
• E) none of these.

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Definitions:

Inferior Good

A type of good whose demand decreases when the income of consumers increases, opposite to normal goods.

Consumer Income

Consumer income is the total earnings of an individual or household from various sources, including employment, investments, and government assistance, available for spending and saving.

Price Floor

A government or group-imposed limit that prevents prices of goods or services from falling below a certain level.

Equilibrium Price

The price in the market where the amount of products offered matches the amount of products people want to buy.