You have two roommates who invest in thestock market.a. One roommate says that he buys
Chapter 14, Problem 8(choose chapter or problem)
You have two roommates who invest in thestock market.a. One roommate says that he buys stockonly in companies that everyone believeswill experience big increases in profitsin the future. How do you suppose theprice-earnings ratio of these companiescompares to the price-earnings ratio ofother companies? What might be thedisadvantage of buying stock in thesecompanies?b. Another roommate says he only buys stockin companies that are cheap, which hemeasures by a low price-earnings ratio. Howdo you suppose the earnings prospects ofthese companies compare to those of othercompanies? What might be the disadvantageof buying stock in these companies?
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