A ________ PE may indicate that the market feels the firm's earnings are very ________ risk and is therefore willing to pay a ________ for them.

Question

Quizplus · Accepted Answer

A high PE ratio indicates that investors are willing to pay a premium for the company's earnings, which suggests that the market feels the firm's earnings are relatively low-risk. Conversely, a low PE ratio suggests that investors are not willing to pay a premium for the company's earnings, which suggests that the market perceives the firm's earnings to be relatively high-risk.

A ________ PE May Indicate That the Market Feels the Firm's