Weighted average harmonic

CFA Level II
#1

Please coment on this formula , no idea of how to get this 1/[(12/27)(1/12) + (15/27)(2/15)] = 27/3 = 9.0

An analyst is calculating the weighted harmonic mean P/E ratio of a 2-stock portfolio. Stocks AAA and BBB have prices of $12 and $15, respectively, and EPS of $1 and $2, respectively. Which of the following is the weighted harmonic mean P/E of the portfolio closest to?

A) 9.23 B) 9.75 C) 9.00

Your answer: C was correct!

The weighted harmonic mean is 1/[(12/27)(1/12) + (15/27)(2/15)] = 27/3 = 9.00 The weighted harmonic mean of the individual stocks P/Es is the best measure of the P/E for a portfolio of stocks.

#2

You probably won’t have to calcute this on the test b/c it is a subset of a subset of a subset.

I would say just remember that to calculate the P/E for a portfolio of stocks use the weighted harmonic mean.

If you must know, it looks like they took the weighted average E/P then they took the reciprocal which is the P/E