Question: Question 4 (9 marks) Assume that you have a regression of PE ratios for the following markets, and arrived at the following result: PE =

Question 4 (9 marks) Assume that you have a regression of

Question 4 (9 marks) Assume that you have a regression of PE ratios for the following markets, and arrived at the following result: PE = 10.5 6.6 Interest Rates + 140.40 Growth in GDP RP=0.67 Which of the following market(s) is overpriced, underpriced or correctly priced? Country Actual PE Ratio Interest Rates Growth in GDP Slovakia 15.471 5.00% 1.50% Ukraine 12.123 4.00% 1.80% Russia 19.395 3.50% 6.50% Question 5 (15 marks) Why is relative valuation so popular in practice? 8

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