A growth stock portfolio and a value portfolio might be characterized
A) each by their P/E relative to the index P/E; high P/E for growth and lower for value.
B) as earning a high rate of return for a growth security and a low rate of return for value security irrespective of risk.
C) low unsystematic risk and high systematic risk respectively.
D) moderate systematic risk and zero systematic risk respectively.

Question

Quizplus · Accepted Answer

Growth stocks typically have higher price-to-earnings (P/E) ratios compared to the market index because investors are willing to pay more for the expected growth in earnings. Value stocks, on the other hand, usually have lower P/E ratios as they are perceived as undervalued relative to their current earnings.

A Growth Stock Portfolio and a Value Portfolio Might Be