CFA Practice Question

There are 201 practice questions for this study session.

CFA Practice Question

Which of the following is the LEAST ACCURATE with respect to using the P/E-to-growth (PEG) ratio?

A. PEG is simply the stock's P/E ratio divided by its expected earnings growth rate. It assumes that there is a linear relationship between P/E and growth.
B. Looking at the PEG ratio alone does not reveal differences in risk.
C. Stocks with the higher PEG are deemed to be more attractive purchases.
Correct Answer: C

Stocks with the higher PEG are deemed to be LESS attractive purchase s. A high PEG implies that the P/E per unit of growth is too high, and thus the stock is too expensive.

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