Which P/E Ratios and Earnings Yields Do Not Match

question 15

Multiple Choice

Which P/E ratios and earnings yields do not match?

• A) P/E ratio 5; earnings yield 20%
• B) P/E ratio 8; earnings yield 12.5%
• C) P/E ratio 9; earnings yield 12 %
• D) P/E ratio 10; earnings yield 10%

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Definitions:

Risky Asset

An asset with an uncertain rate of return.

Indifference Curves

Indifference Curves represent a graphical representation of different bundles of goods between which a consumer is indifferent, showing preferences across different combinations of two products.

Risk-Averse

A description of an investor or investment strategy that prioritizes the minimization of risk over potential gains.

Expected Return

The average return of an investment, accounting for the likelihood of different outcomes, weighted by their probabilities.