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Price earning ratio

6. The P/E ratio (price earnings) ratio for each stock is determined by dividing the price of a share of stock by the earnings per share reported by the company for the most recent four quarters. A sample of 10 stocks taken from the Wall Street Journal (on September 29th, 2000) provided the following P/E ratios:

5, 7, 9, 12, 14, 24, 20, 15, 3, 28.

a. What is the point estimate of the mean and the Standard Deviation P/E ratio for the population of all stocks listed on the New York Stock Exchange?

b. At 98% confidence, what is the interval estimate of the mean P/E ratio for the population of all stocks listed on the New York Stock Exchange?

c. Test (using the two tailed test) at a 2 % significance level, the hypothesis that the mean P/E ratio for the population is $ 18.

Solution Summary

What is the point estimate of the mean and the Standard Deviation P/E ratio for the population of all stocks listed on the New York Stock Exchange?

$2.19