Firms with high expectations for the future tend to trade at high P/E ratios.

Name: Firms with high expectations for the future tend to trade at high P/E ratios.
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Quizplus · Accepted Answer

This is because investors are willing to pay a premium for companies that are expected to have strong future growth and earnings potential. As a result, the market prices these companies at a higher multiple of their current earnings, resulting in a higher P/E ratio.

Firms with High Expectations for the Future Tend to Trade