Niblita75 Wrote: ------------------------------------------------------- > I get 15.03 > > Real rate: (1.08/1.03) - 1 = .048543689 > P/E = 1/(.048543689 + (1-.4)*.03) = 15.03 That is what I got. The exact value of the real rate should be 4.854%, not 5%.
ooooh, i see. well it’s close enough, wouldn’t worry about that.
hey, sorry took a break for dinner. i got dude’d? my notecard is SS11. what’d i bet wrong on here? i doubt we’ll ever see this equation. just a random one i looked at while flipping through my stack that i said DUDE to. if you want an actual q-bank question, giddy up… if not, i’m about ready to put this topic to bed. Firm 1 and Firm 2 are both based in countries with a 3% rate of inflation. The real rate of return required by investors from both companies is 4%. Firm 1 can pass on 70% of inflation through its earnings and Firm 2 can pass on 90%. Based on the above information, which of the following statements is most accurate? A) Firm 1’s estimated price-to-earnings (P/E) ratio is 16.39. B) Firm 1’s estimated price-to-earnings (P/E) ratio is higher than Firm 2’s. C) Firm 2’s estimated price-to-earnings (P/E) ratio is 14.93. D) Firm 1’s estimated price-to-earnings (P/E) ratio is 20.41.
D for the win.
D, bannisja, I was just saying you bet wrong when you said I wouldn’t know it, just joking around.
LOL, yeah it amazes me the knowledge that AF’ers have. if you knew this, i’m sure whatever item sets they throw at you are going to be just fine. D for the win… AND IT’S GOOD! Firm 1’s P/E ratio = 1 / (4% + (1 − 70%) × 3%) = 20.41 Firm 2’s P/E ratio = 1 / (4% + (1 − 90%) × 3%) = 23.26 Therefore, Firm 1’s estimated P/E ratio is lower than Firm 2’s
I don’t know any of this stuff. I am starting to get pretty worried.
A little break down on my answering process which boosts speed, I looked at the four choices, B required no calcs so I reasoned it out in my head and was able to eliminate it based on fundamental principle. I then knew I’d have to fire up my TI Bad Ass II Plus, so I looked at the remaining answers (A,C,D) and realized two of them involved firm 1 so I played the odds and calculated that one first realizing that I could either get one of those two answers or immediately rule them out and select C by illimination. I wound up getting D with the calc, but the moral of the story is, saving time and energy that way adds up on 6/7.
I was lucky and did one calc and it turned out to be D.
I still only had to do 1 calc.
I didn’t have to type 6 lines of thought.
Took me .4 seconds to run through those options, just saying if you naturally approach problems that way, you can save yourself alot of grief, especially on larger problems.
mcpass Wrote: ------------------------------------------------------- > Bannisja, what LOS is this? I like the Q. I looked it up too. It’s page 66 of Schweser book 4. Reading 40 LOS 40.h Kudos to you guys for remembering the formula. Could lend itself well to an emerging markets question (high inflation) I would think. I can’t seem to find much in the way of calcultions in that section.
Black Swan Wrote: ------------------------------------------------------- > Took me .4 seconds to run through those options, > just saying if you naturally approach problems > that way, you can save yourself alot of grief, > especially on larger problems. I was just kidding.
And I was just needing sleep, this stress will be the death of me, sorry, it comes in flashes.
i fear an emerging mkts item set.
bannisja Wrote: ------------------------------------------------------- > i fear an emerging mkts item set. You and me both, I can’t think of anything I’d rather see less of except maybe synthesis and triangular arb. When I see triangular arb, my mind literally just stops.
No problem. Stress is getting bad for me too. I am way too young to get gray hairs. However, that started last year at L1 and its building.
really? you’re good. why would tri-arb scare you? it’s not hard. wow, we need to find a tri-arb question and play ball. you should love triangular arbitrage. i hope the whole friggin econ set is on tri-arb.
Dude, I wish I had before and after pictures. I am definitely much more bald and I got my first 2 grey hairs as well (I’m 24). This blows, sometimes I think if I’d known what I was getting into with L1, I would have never signed up. I honestly thought I could study like 100 hours or so per level and blow this thing out of the water in 2.5 years.