All things being equal,if investors expect earnings to increase substantially from current levels,the price to earnings ratio will:

Question

Quizplus · Accepted Answer

When investors expect earnings to increase substantially from current levels, they will be willing to pay more for a share of that company's stock. This means that the price of the stock will rise, and the price to earnings ratio (P/E ratio) will also increase. A high P/E ratio indicates that investors are optimistic about a company's future earnings potential. Therefore, the best choice is B.

All Things Being Equal,if Investors Expect Earnings to Increase Substantially