Question #18
Reading: Reading 39 Economics and Investment Markets
PDF File: Reading 39 Economics and Investment Markets.pdf
Page: 7
Status: Unattempted
Correct Answer: B
Question
Price multiples are least likely to increase when:
Answer Choices:
A. Equity risk premium increases
B. Earnings growth increases
C. Inflation expectations decline
Explanation
Price multiples are positively related to earnings growth and negatively related to each of
the components of the discount rate (i.e., real rate, inflation premium, equity risk
premium).