CFA Alternative Investments Coaching:
Sales comparison approach: It is based on sales price of the comparable properties. Valuation can be done relative to a similar property or to a benchmark property price, which is then adjusted accordingly based on features of subject property to get its price.
This is one method of comparing different types of instruments.
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Income Approach: It values the property based on the income it produce. It is typically used for income producing properties. It assumes that a property produced an infinite stream of cash flows, which it uses to value the respective property using the required rate of return or cap rate for the property.
We have discussed this approach here because this are very testable concept and be ready to see at least one concept in the exam.
Important readings for exam!
- Investing in Commodities
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