Final answer:
Investors may choose stocks with high P/E ratios for reasons such as high growth potential, high dividend yield, and low financial risk.
Step-by-step explanation:
Investors may intentionally choose stocks with high Price/Earnings (P/E) ratios because:
- The company has high growth potential: A high P/E ratio can indicate that investors expect the company's earnings to increase in the future. They believe the stock price will rise as a result, allowing them to sell the stock at a higher price and make a profit.
- The stock offers high dividend yield: Some investors may choose stocks with high P/E ratios because they anticipate the company will pay high dividends in the future. These dividend payments can provide a regular income stream for investors.
- The company has low financial risk: A high P/E ratio can suggest that the company is financially stable. Investors may be attracted to these stocks because they perceive them as having lower risk compared to other investments.