Years purchase revisited: quarterly in advance cash flows

Abstract

Purpose

The purpose of this paper is to explain the derivation of the years purchase (YP) quarterly in advance formula.

Design/methodology/approach

This education briefing is an overview of the YP quarterly in advance formula in the context of the UK real estate market.

Findings

Whilst arithmetically more precise than market practice it lacks a compelling reason to be adopted in its place.

Practical implications

Understand the effect on stated yields of using annually in arrears, rather than quarterly in advance, assumptions.

Originality/value

This is a review of existing models.

Citation

Patrick, M. (2015), "Years purchase revisited: quarterly in advance cash flows", Journal of Property Investment & Finance, Vol. 33 No. 3, pp. 291-298. https://doi.org/10.1108/JPIF-02-2015-0015