The price of a share of stock divided by the company\'s estimated future earning

Question

The price of a share of stock divided by the company's estimated future earnings per share is called the P/E ratio. High P/E ratios usually indicate "growth" stocks, or maybe stocks that are simply overpriced. Low P/E ratios indicate "value" stocks or bargain stocks. A random sample of 51 of the largest companies in the United States gave the following P/E ratios†.

(a) Use a calculator with mean and sample standard deviation keys to find the sample mean x and sample standard deviation s. (Round your answers to one decimal place.)

(b) Find a 90% confidence interval for the P/E population mean ? of all large U.S. companies. (Round your answers to one decimal place.)

(c) Find a 99% confidence interval for the P/E population mean ? of all large U.S. companies. (Round your answers to one decimal place.)

11 35 19 13 15 21 40 18 60 72 9 20 29 53 16 26 21 14 21 27 10 12 47 14 33 14 18 17 20 19 13 25 23 27 5 16 8 49 44 20 27 8 19 12 31 67 51 26 19 18 32

Explanation / Answer

The statistical software output for this problem is:

Summary statistics:

One sample T confidence interval:
? : Mean of variable

90% confidence interval results:

99% confidence interval results:

Hence,

a) x = 25.2

s = 15.7

b) 90% confidence interval:

Lower limit = 21.5

Upper limit = 28.8

c) 99% confidence interval:

Lower limit = 19.4

Upper limit = 31.0

Column Mean Std. dev. Data 25.176471 15.472176

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