Please Help Me With This Finance Exercise

[mufarrid]

By looking at stock’s P/E ratios we may be able



a.Identify government spending

b.Identify asset bubbles

c. Low-interest rates

d.None of the above

[Buenchico]

A bit of simple thought should tell you the answer here:

The P/E ratio of a stock obviously has nothing to do with government spending. So that's answer (a) out of the window.

It also has nothing to do with interest rates, so we can throw out (c) as well.

That only leaves (b) or (d). Given that question setters only rarely have 'none of the above' as the right answer, that weights the odds heavily in favour of (b) but, for certainty, simply googling 'P/E ratio asset bubble' should be enough to show you that there's a link. So (b) is your answer.