A price-earnings ratio or P/E ratio is calculated as a firm’s share price compar

Question

A price-earnings ratio or P/E ratio is calculated as a firm’s share price compared to the income or profit earned by the firm per share. Generally, a high P/E ratio suggests that investors are expecting higher earnings growth in the future compared to companies with a lower P/E ratio. The following table shows the P/E ratios for a sample of firms in the footwear industry: Use Table 2.

SOURCE: http://biz.yahoo.com, data retrieved September 2, 2012.
  

Construct the 90% confidence interval for the mean P/E ratio for the entire footwear industry. (Round intermediate calculations to 4 decimal places. Round "t" value to 3 decimal places and final answers to 1 decimal place.)

A price-earnings ratio or P/E ratio is calculated as a firm’s share price compared to the income or profit earned by the firm per share. Generally, a high P/E ratio suggests that investors are expecting higher earnings growth in the future compared to companies with a lower P/E ratio. The following table shows the P/E ratios for a sample of firms in the footwear industry: Use Table 2.

Explanation / Answer

Here mean=19.4 and sd=5.03

t value is 2.132

So E=t*sd/sqrt(n)=4.8

Hence CI=mean+/-E=(14.6,24.2)

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