Series 7 Exam Question 379: Answer and Explanation

Question: 379

AylDec Corporation common stock is currently trading in the market for $22 per share. AylDec Corp. pays an annual dividend of $0.60 per share and has an earnings per share (EPS) of $4. What is the PE ratio?

• A. 4.50
• B. 5
• C. 5.50
• D. Cannot be determined

Correct Answer: C

Explanation:

C. You can quickly cross off Choice (D), because this answer can be determined. To determine the price/earnings (PE) ratio, use the following formula:

The answer is 5.50, Choice (C).