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NISM Certifications · NISM-Series-X-A: Investment Adviser (Level 1) · Investing in Stocks

Tata Steel shares are quoted at Rs 150 and the company's earnings per share are Rs 12. Its book value per share is Rs 100. What are the P/E ratio and the P/B ratio respectively?

The P/E ratio is 12.5, found by dividing the price of Rs 150 by earnings per share of Rs 12. The P/B ratio is 1.5, found by dividing the price of Rs 150 by book value per share of Rs 100.

  1. A12.5 and 1.5Correct
  2. B8.0 and 1.5
  3. C12.5 and 0.67
  4. D8.0 and 0.67

Explanation

P/E = 150/12 = 12.5. P/B = 150/100 = 1.5. Option two inverts P/E (12/150 scaled wrongly as 8), and options three and four invert P/B.

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