The higher the investor's required rate of return, the higher the P/E ratio will be.

Name: The higher the investor's required rate of return, the higher the P/E ratio will be.
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Quizplus · Accepted Answer

A higher required rate of return typically leads to a lower P/E ratio because investors are discounting the company's earnings more heavily, which reduces the present value of those earnings and thus the price they are willing to pay for them.

The Higher the Investor's Required Rate of Return, the Higher