Price-to-earnings ratio, The Price-to-Earnings ratio (P/E)

Price-to-earnings ratio

Reference no: EM1311889

The Price-to-Earnings ratio (P/E) of a publicly listed profit-making company is defined as the ratio of the stock price of the company to the earnings per share. It is a commonly used measure of whether the stock is underpriced, overpriced, or priced in a reasonable range. You may assume that the distribution of P/E ratios of publicly listed companies is normal. A sample of 33 publicly listed profit-making companies was examined, and the sample mean was found to be 11.17 with a standard deviation of 2.13.

Using the same sample whose sample mean was 11.17 and sample standard deviation was 2.13, a confidence interval for a different level of confidence was constructed, and found to be [10.155, 12.185]. To what level of confidence does this interval correspond?

a) 95%

b) 98%

c) 99%

d) 100%

Reference no: EM1311889

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