Asked by Brandon Gaylord on Jun 03, 2024
Verified
Since 1955, Treasury bond yields and earnings yields on stocks have been
A) identical.
B) negatively correlated.
C) positively correlated.
D) uncorrelated.
Treasury Bond Yields
The return investors can expect to receive from holding a government treasury bond until its maturity.
Earnings Yields
A financial metric calculated by dividing earnings per share by the current market price per share, serving as the inverse of the P/E ratio.
- Comprehend the connection between inflation rates and price-to-earnings ratios.
Verified Answer
ZK
Zybrea KnightJun 04, 2024
Final Answer :
C
Explanation :
Since 1955, Treasury bond yields and earnings yields on stocks have generally been positively correlated, meaning that as the yield on Treasury bonds increases or decreases, the earnings yield on stocks tends to move in the same direction. This relationship is influenced by various factors including economic conditions, inflation expectations, and monetary policy.
Learning Objectives
- Comprehend the connection between inflation rates and price-to-earnings ratios.