A low P/E for a stock indicates that:
1 answer:
Answer:
(A). People may expect earnings to fall in the future, perhaps because the firm will be faced with increased competition.
Explanation:
Price Earnings ratio of a company represents market price per share of a company's stock in relation to it's earnings per share.
Price Earnings ratio(PER) is given by the following formula:
PER =
A lower P/E Ratio indicates that a company's market price of a share is lower relative to it's earnings. This means the company's stock is undervalued.
It can also mean that the company's earnings have increased which in turn has increased it's earnings per share.
Investors in general expect lower earnings in future for the stock of a company with low P/E Ratio.
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Answer:
The portfolio SD is A. 20.65%
Explanation:
The standard deviation tells the total risk (both systematic and unsystematic) associated with a stock or a portfolio. The portfolio risk or the standard deviation of portfolio can be calculated using the following formula as attached in the picture below.
Using this formula, the standard deviation of the portfolio is:
SDp = √(0.3)² * (0.2)² + (0.7)² * (0.25)² + 2 * (0.3)*(0.7) * 0.4 * (0.2)*(0.25)
Portfolio SD = 0.20645 or 20.645% rounded off to 20.65%
