Which of the following statements regarding P/E ratios is true?
A) Generally, the riskier a stock, the higher its P/E ratio.
B) Over the long term, low P/E ratio stocks tend to have higher returns than high P/E ratio stocks.
C) As the level of interest rates increase, P/E ratios are expected to decline.
D) Higher growth prospects for a firm do not lead to higher P/E ratios.

Question

Quizplus · Accepted Answer

Over the long term, low P/E ratio stocks tend to have higher returns than high P/E ratio stocks.

Which of the Following Statements Regarding P/E Ratios Is True