. Stock C has P/E ratio of 11.27, earnings of S642 million and 113 million sh ra
ID: 3044237 • Letter: #
Question
. Stock C has P/E ratio of 11.27, earnings of S642 million and 113 million sh ratio have average P/E ratio of 12.16. What of the following is peces The currest price of Stock C is 504.03 and you b The eurrent price of Stock C in $04.03 and you sbould a should buy it sell it shore The curreat price of Stock C is s69.09 and you should buy it d The current price of Stock C is 569.09 and you should sell it short 9. The market portfolio has average return of 9% and the risk-free rate is 4%, which of the following assets violates the CAPM? standard deviation of 16%. If Asset A with expected return of 7% and standard deviation of 11% Asset B with expected return of 13% and standard deviation of 30% Asset C with expected return of 15% and standard deviation of 34% Asset D with expected return of 17% and standard deviation of 45% a 10. You feel confident that the market will go down in the nearest future. Which of the following correctly ranks the possible investment choices from the least attractive to the most attractive? a treasury bond, junk bond, buy the market index, put option on the market b short futures on the market, buy the market index, short the market index, put option on the market c treasury bond, call option on treasury bond, corporate bond, short futures on the market, call option on the market, treasury bond, junk bond, put option on junk bond, dExplanation / Answer
We have been given certain params of Stock C:
Stock C' P/E = 11.27. Earnings are $642 million on 113 m shares outstandading
Average peer P/E = 12.16
Current stock price = P/E *( Earnings)/Shares outstanding = 11.27*642/113 = $64.03
Since, P/E is smaller than peer P/E, it is at a discount w.r.t to peers. So,
a. is the best answer and this is correct
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