If a stock has a much higher than normal P/E ratio, investors probably expect ... O A. rapid growth in earnings. O B. a declining stock price OC. slow growth in earnings. O D. large increases in the price of the stock.

for your explaination on the second one, i think you mean the answer is B. as you stated it will result into decrease of expected return if stock

If the intrinsic value of a stock is below the current market price, over time we can expect buy orders to exceed sell orders, causing the price to rise buy and sell orders to be evenly matched, keeping the price at its current level sell orders to exceed buy orders, causing the price to rise sell orders to exceed buy orders, causing the price to fall buy orders to exceed sell orders, causing the price to fall

6) An investor holds a portfolio of stocks and is considering investing in the DBB Company. The firm's prospects look neutral, and you estimate the following probability distribution of possible returns: Conditions Recession P Returns on DBB Returns on DVI 0.12 -33% -12% Below Average 0.15 -18% 7% Average 0.46 12% 11% Above Average 0.15 25% 23% Boom 0.12 37% 25% a) How much is the expected return for DBB? b) How much is the coefficient of variation for DBB? c) Now let's say you want to add another asset, DVI, to your portfolio. You sell 35% of DBB to purchase DVI. How much is your expected return for this portfolio? d) How much is the coefficient of variation for the new portfolio?

Hansaben

If the expected rate of return on a stock is less than the required rate of return, The stock is experiencing supernormal growth. The stock should not be bought. The company is probably not trying to maximize its stock price. The stock is a good buy. Dividends are not being declared.

E2

The disposition effect:   a. Is the tendency of stock investors to sell their winning stocks and hold onto their losing stocks   b. Is consistent with regret avoidance behaviour   c. Is a consequence of investors’ preference for lottery-type stocks   d. (a) & (b)   e. (a), (b) & (c)

A higher growth rate (g) will affect the P/E ratio as follows   Question 9 options:   1)  Increase the earnings multiplier (P/E ratio)   2)  Decrease the earnings multiplier   3)  It depends upon the growth rate of the required return of the stock   4)  None of the above

7. Consider the following information about Stocks I and II: Probability of Rate of Return if State Occurs State of Economy Recession Normal Irrational exuberance State of Economy .25 .50 .25 Stock I .02 .21 .06 Stock Il -.25 .09 .44 The market risk premium is 8 percent, and the risk-free rate is 4 percent. Which stock has the most systematic risk? Which one has the most unsystematic risk? Which stock is "riskier"? Explain.