Case 1 Peachtree Securities

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Case 1: Peachtree Securities, Inc. (A) Executive Summary Laura Donahue was hired by Peachtree Securities as a recent graduate to work as a financial analyst. Her first task would be to conduct a seminar for customers of Peachtree Securities, with the goal of educating them on stock investments and portfolio performance. There are many aspects to the subject of investments and performance, and a particular highlight of this subject is the calculation and evaluation of risk and return. When it comes to looking at risk and return, there are certain terms and calculations important for investors to know. These are expected returns, standard deviations, correlations of variation, and the capital asset pricing model (CAPM). Expected returns are important to determine if an investment will be beneficial to the investor. Standard deviation is a measure of risk. Correlation of variation is the ratio of risk over expected returns. CAPM is based on the idea that investors consider the time value of money and risk analysis. Laura should make sure to highlight the possibilities of investing surrounding the main energy stock of interest to her, TECO Energy, Inc. Laura should present the analysis during the seminar that shows different possibilities when investing with TECO. It should be highlighted that although the expected returns are not the highest compared to other options, when risk is also factored in, TECO would be the best of the options. An investor could also reduce the risk of investment by including TECO in an investment portfolio. The best portfolio of the options to be used in the seminar would be portfolio using TECO and Gold Hill, a gold mining company. The effects on risk reduction by having these two, negatively correlated stocks, would be integral to a risk adverse investor. Laura should be sure to express that returns can be maximized and risk minimized by

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