Chapter 2: Financial Markets: Part 2
Company ABC (10,000 shares outstanding) Year 1 2 3 Exp. Earnings $15,000 $50,000 $100,000 Exp. 1 yr Interest Rate 0.03 0.04 0.05 Price to earnings ratio (PE ratio): The price to earnings ratio is often used by investors as a guidepost as to whether a stock is “overvalued” or “undervalued.” ................
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