Papers

Third Support Pro Argument

Investopedia (2014) explains that “volatility refers to the amount of uncertainty or risk about the size of changes in a security’s value.” A higher volatility means that the price of the securities can change radically over a short time period either in high or low direction. A lower volatility means that the securities do not fluctuate dramatically but its value will be steady over a period of time (Investopedia US 2014).

Investors loan funds to the companies or governments agencies in exchange for a bonds that guarantees a fixed return and a principal amount plus any interest income. Stocks are partial ownership to the company that entitle the stockholder to share the earnings that may occur and accrue. In this, the investors share income through dividends payments (Smith 2014).

The stocks give the higher risks to the investors because it will be a dependent to the earnings of the company; hence, it provides a higher volatility. The stock price changes day-to-day basis that depict of becoming a high volatile in a long run. On the other hand, bonds provide a fixed return on a maturity date that will be resulted to a low volatile. There will be changes on value of bonds but it is not as higher of changes in stocks.

On January 1, 2013, Ott Company sold goods to Fox Company. Fox signed a noninterest-bearing note requiring payment of P600, 000 annually for seven years. The first payment was made on January 1, 2013. The prevailing rate of interest for this type of note at date of issuance was 10%. Information on present value factors is as follows:

Period Present value of 1 at 10% Present value of ordinary annuity of 1 at 10%

6 .56 4.36

7 .51 4.87

What amount should be recorded as sales revenue in January 2013?

a. 3,216,000

b. 2,922,000

c. 2,616,000

d. 2,142,000

The answer is letter A. Here’s the solution how we came up.

First payment on January 1, 2013 600,000

Present value of...