Basu (1977,1983)found That Firms with High P/E Ratios

question 49

Multiple Choice

Basu (1977,1983) found that firms with high P/E ratios

• A)earned higher average returns than firms with low P/E ratios.
• B)earned the same average returns as firms with low P/E ratios.
• C)earned lower average returns than firms with low P/E ratios.
• D)had higher dividend yields than firms with low P/E ratios.
• E)none of the above.

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Definitions:

Bond Discounts

The difference between the face value of a bond and its selling price when the bond is sold for less than its face value.

Interest Income

The income earned by an entity from its investments in interest-bearing financial instruments, such as bonds or savings accounts.

Interest Receipt

The amount of interest income received by an investor or lender from investments, loans, or savings.

Long-Term Investments

Investments held by a company not intended for sale in the short term and expected to deliver value over an extended period.