ABSTRACT
Interest rates are an integral function of investment. In return for the forgoing of expenditure now, an investor can place cash into investments that attract interest payments. The interest thus earned will hopefully offset or even surpass the reduction, due to inflation, in real value or purchasing power of the invested cash over time. Interest rates are always quoted as a percentage,
In this chapter … • The difference between simple and compound interest. • How and why property valuation calculations use the compound approach. • The basis of traditional valuation formulae and tables and how calculators and computers
can assist. • How allowing for interest receivable on an investment will affect its value today. • What an all risks yield is and why it is used. • Calculating what a sum of money invested now will accumulate to in the future with
interest added. • What present value is and why it is an important concept for property valuation. • Finding how much is accumulated when annual sums are invested.
