ABSTRACT
This chapter discusses the financial or investment based arithmetic tools utilised in the income approach. It explores the process of property valuation, with particular reference to property which is bought or sold as an investment. The chapter looks at the time value of money and the inter-related six functions. Those functions include those dealing with the way money can grow over time; and those which look at future sums of money and discount them over time from a known future date to assess a value for them at the present time. The chapter explores the practical uses of these functions and their application to the income approach to property valuation. Individuals and organisations with surplus money, that is money not required for satisfaction of immediate purchases of goods and services, can save or invest that surplus or leave it under a mattress. When money is invested in a savings account, interest accumulates on the principal which remains in the account.
