Finance: P/E of Stocks The price to earnings ratio (P/E) is an important tool in financial work. A random sample of 14 large U.S. banks (J. P. Morgan, Bank of America, and others) gave the following P/E ratios (Reference: Forbes). 24 16 22 14 12 13 17 22 15 19 23 13 11 18 The sample mean is Generally speaking, a low P/E ratio indicates a value or bargain stock. A recent copy of The Wall Street Journal indicated that the P/E ratio of the entire S&P 500 stock index is Let x be a random variable representing the P/E ratio of all large U.S. bank stocks. We assume that x has a normal distribution and Do these d

STATS 2 41 Week 8 Chapter 9 ↬Confidence interval- estimated values of the parameter ↬Hypothesis testing- assuming the parameter is the claimed value and finding evidence against it ↬Type 1 Error- a false positive (ex: innocent person pronounced guilty) ↬Type 2 Error- a false negative (ex: guilty person pronounced innocent) *Type 1 and 2 errors are related if the probability of one increases when the other decreases ↬P-Value- the probability that the statistic is beyond the claimed value *If the P-Value is less than the significance level (a)