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Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FM Exams › PE ratio
Hello sir,
If a company has a low pe ratio, Capm is unable to forecast returns accurately.
Why does this sentence is correct?
As it stands, the statement on its own is not strictly true (where have you found the statement – it depends somewhat on the context).
CAPM does not forecast returns. CAPM determines the rate of return demanded by shareholders, which is not the same as forecasting the returns.
