Portfolio Betas Will Always Be Greater Than 1.0

question 46

True/False

Portfolio betas will always be greater than 1.0.

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Definitions:

Effective-Interest Method

A method of calculating the amortized cost of a bond and the amount of interest expense over time, by applying a constant interest rate to the carrying value of the bond.

Straight-Line Method

A way of calculating depreciation by evenly spreading the cost of an asset over its useful life.

Premium Amortization

The gradual reduction of the premium paid above the face value of a bond, allocated over the life of the bond.

Bond Premium

The difference between the selling price of a bond and the bond’s face value when the bond is sold for more than par.