CFA Practice Question

There are 57 practice questions for this study session.

CFA Practice Question

In the supply side analysis, the expected growth rate in the P/E ratio should be ______ if the market is efficient.

A. 0.
B. 2%.
C. 5%.
Correct Answer: A

User Contributed Comments 5

User Comment
kasthala why?
kodali If the market is efficient and discounts all the risk the risk premium should be constant and the growth rate of p/e should be zero
charomano P/E = D / (k-g)

g=0 => you discount cash flows at the required rate of return
birdperson good question
JZERMENO Because zero is the rate that leads to equilibrium (from a macro point of view)
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