Other things equal, if the:
A) required return increases, the P/E ratio will rise.
B) risk premium increases, the P/E ratio will rise.
C) risk-free rate rises, the P/E ratio will fall.
D) dividend payout increases, the P/E ratio will fall.

Question

Quizplus · Accepted Answer

An increase in the risk-free rate typically leads to a higher required return, which reduces the present value of future earnings, thus lowering the P/E ratio.

Other Things Equal, If The