Which P/E ratios and earnings yields do not match?
A) P/E ratio 4; earnings yield 25%
B) P/E ratio 6; earnings yield 15 %
C) P/E ratio 8; earnings yield 12.5%
D) P/E ratio 10; earnings yield 10%

Question

Quizplus · Accepted Answer

Earnings yield is calculated as the inverse of the P/E ratio, expressed as a percentage. For example, a P/E ratio of 4 corresponds to an earnings yield of 1/4 = 25%. Similarly, a P/E ratio of 10 corresponds to an earnings yield of 1/10 = 10%. However, for choice B, a P/E ratio of 6 should correspond to an earnings yield of 1/6 = approximately 16.67%, not 15%.

Which P/E Ratios and Earnings Yields Do Not Match