Firms with higher expected growth rates tend to have P/E ratios that are ________ the P/E ratios of firms with lower expected growth rates.

Question

Quizplus · Accepted Answer

Firms with higher expected growth rates are perceived as having more growth opportunities, which leads to a higher demand for their stocks, thus increasing their P/E ratios compared to firms with lower expected growth rates.

Firms with Higher Expected Growth Rates Tend to Have P/E