Final answer:
Yield Capitalization involves the use of present discounted value to estimate the value of property based on its anticipated future income stream, which is adjusted to reflect current market conditions and investor expectations. Option C is correct.
Step-by-step explanation:
The method of valuing property by discounting the anticipated income stream at an appropriate rate is referred to as Yield Capitalization. This approach involves applying the concept of present discounted value (PDV) to property valuation, much like it is applied to financial assets like bonds. When the market interest rate changes, the value of these assets changes accordingly, either increasing above or dropping below the face value.
Similarly, with property, expected profits from income or capital gains are not set in stone—they are often estimates subject to market conditions and investor expectations. In property valuation, choosing the right interest rate to discount future income can impact the value significantly, reflecting the balance between present costs and the present discounted value of future benefits.