Final answer:
The income approach determines a property's value based on its return, often used for investment properties. It considers future income potential and capitalizes that income stream to present value. Housing investments offer moderate returns but are less liquid and carry moderate risk.
Step-by-step explanation:
The correct statement about the income approach to value is: A. It determines an investment property's value based on its return. This appraisal method estimates the value of an income-producing property by calculating its current value based on the revenue it generates, usually from rent. It presumes that the income from the property will continue, and applies a capitalization rate to this income to determine the current value of the property.
Regarding investments in tangible assets such as housing, it is important to note that the rate of return can be moderate, as owning a house may offer nonfinancial benefits, like living in it. However, risk is deemed moderate for housing and high for other assets such as gold or collectibles. Additionally, liquidity for these assets tends to be low because they can take significant time and effort to convert into cash.