单选题 All else equal, which of the following would most likely cause a firm"s price-earnings ratio to decline?

A、 The level of inflation is expected to decline.
B、 The dividend payout ratio increases.
C、 The yield on Treasury bills increases.

【正确答案】 C

【答案解析】The risk free rate is a component of k _e . k _e can be represented by the following: nominal risk free rate + stock risk premium, where nominal risk free rate = [(1 + real risk free rate) × ( 1 + expected inflation rate) ]-1. If the nominal risk free rate increases, k _e will increase. The spread between k _e and g, or the P/E denominator, will increase. P/E ratio will decrease. P/E = payout ratio/(k _e -g).