Answer to Question #281989 in Finance for Aston

Question

By looking at stock’s P/E ratios we may be able

a.Identify government spending

b.Identify asset bubbles

c. Low-interest rates

d.None of the above

Answer 1

Answer:

The P/E ratio of a stock obviously has nothing to do with government spending. So that's the answer (a) out of the window.

It also has nothing to do with interest rates, so we can throw out (c) as well.

P/E (price-to-earnings) ratio is used to detect bubbles.

The answer is (b) asset bubbles.