Case 2- Peachtree Securities
1. The T-bond return in Table 1 is shown to be independent of the state if the economy because it doesn't depend on the state of economy. This is because the treasury will receive the bills regardless, 8% at all times. T-Bonds is risk free since it doesn't vary according to the state of economy.

2. The S&P 500 because it has the most expected return.

3. These statistics measure in investment's volatility risk. The standard deviation is the better measure. The alternatives com are when risk is considered because your risk return trade off will be better the lower of standard deviation to mean return. Coefficient of variation allows you to see how much risk you will assume other than the amount of return you'll expect from your investment.

6. A: Risk should decrease
B: Investors should hold well diversified portfolios. Investors are interested in the impact of a stock in the portfolio.
C: Total risk- risk decreases, diversifiable risk- cost of equity decreases, market risk- wacc decreases
D: No, return doesn't compensate for risk.

8.Rate of return is 12.20%. Yes, investors should buy the TECO stock.

9. Required return= 13.40%, 12.80%, 15%. This would effect the required rate of return immediately in the price. Investors can only be obtained in a normal rate of return, financial decisions are irrelevant.

10. Decrease in all perfect of debt ratio. RIsk equity. Beta. Required rate of return.

11. Yes, it would affect the validity of Value Line's 0.6 beta for decision purpose. It would affect the returns within the years.

12. That would impact by making the risk for TECO raise more and more as the years go by. The rate of return would increase.