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# The P/E ratio (price earnings) ratio

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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.

https://brainmass.com/economics/econometrics/the-p-e-ratio-price-earnings-ratio-51097

#### 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

## PE ratios and market-to-book ratios questions

1- How can a company with a high ROE have a low PE ratio?

2- What type of companies have:

a. a high PE ratio and a low market-to-book ratio?

b. a high PE ratio and a high market-to-book ratio?

c. a low PE ratio and a high market-to-book ratio?

d. a low PE ratio and a low market-to-book ratio?

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