Question
9) Which of the following statements is FALSE? A) The most common valuation multiple is the price-earnings (P/E) ratio. B) You should be willing to
9) Which of the following statements is FALSE? A) The most common valuation multiple is the price-earnings (P/E) ratio. B) You should be willing to pay proportionally more for a stock with lower current earnings. C) A firm's P/E ratio is equal to the share price divided by its earnings per share. D) The intuition behind the use of the P/E ratio is that when you buy a stock, you are in sense buying the rights to the firm's future earnings and differences in the scale of the firms' earnings are likely to persist.
10) Which of the following is NOT a situation where a trader is able to identify positive NPV trading opportunities in the securities markets? A) An investor who has access to information known only to a few investors. B) An investor who has lower trading costs than other market participants.
C) An investor who gets up really early in the morning so he can be the first to read and act upon the information contained in that day's Wall Street Journal. D) An investor who has expertise in a highly complicated area for which a company has just released information.
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