Asked by Jessie Kindley on Jun 05, 2024
Verified
Historically, P/E ratios have tended to be
A) higher when inflation has been high.
B) lower when inflation has been high.
C) uncorrelated with inflation rates but correlated with other macroeconomic variables.
D) uncorrelated with any macroeconomic variables, including inflation rates.
P/E Ratios
The price-to-earnings ratio, a valuation metric for stocks calculated by dividing the current market price of a stock by its earnings per share.
Macroeconomic Variables
Economic indicators that represent the overall health and performance of an economy, such as GDP, inflation rates, and unemployment rates.
Inflation
The rate at which prices for commodities and services overall ascend, depleting the power of purchase.
- Understand the relationship between inflation rates and P/E ratios.
Verified Answer
Learning Objectives
- Understand the relationship between inflation rates and P/E ratios.
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