It is not possible for a financial system to exist without the concept of interest rates.Interest rates are one of the most crucial aspects of the financial system.They are used to determine the cost of borrowing, the return on investment, and are also an integral constituent of the total return on most investments.In addition, some interest rates give insights into the future of financial markets and the economy.In addition, interest rates are used as monetary tools by the monetary authorities (Leeds, Von Allmen, & Schiming, 2006).Although it is possible to operate banking system without the concept of interest rates, as it happens in Islamic banking (Saeed, 2010), it is not possible to run the entire financial system without interest rates.It is inconceivable to have an economy which has no time value of money.The concept underlying the time value of money is that a given sum of money received today is more than the same amount of money received in future.Time value of money is an indispensable concept in an economy because it is influenced by inevitable forces in the economy such as inflation, which reduces the value of money over time.Accordingly, time value of money is applied in making of investments and all financial decisions that involve arrangements to make or receive payment in the future (Shim & Siegel, 2008).Change in interest rates can be influenced by a host of factors.One of the factors underlying change in interest rates are actions of the monetary authority.For example, in the United States, the FED can cause interest rates to rise or fall by selling or buying treasuries respectively.Other key factors that influence change in interest rates include the strength of the economy impacts supply and demand of funds, fiscal policy, and expectations of inflationary levels (Leeds, Von Allmen, & Schiming, 2006).The efficient market hypothesis argues that financial markets integrate all information available in the public domain and that stock prices reflect all the relevant information.Accordingly, stock prices are accurate in average, meaning that markets are efficient and no active investor can beat the market by taking advantage of any public information (Harder, 2008).The efficient market hypothesis is, however, faulted for being weak in several aspects.The hypothesis assumes that all investors view all available information in precisely in the same way.However, the many techniques of analyzing and valuing stock curtail the validity of EMH.For example, if one investor is looking for an undervalued market opportunity and another one assesses a stock on based on its potential for growth, the two investors will arrive at a different evaluation of the fair market value of the stock.Thus, because investor values stocks differently, it is not possible to ascertain the value of a stock under an efficient market (Harder, 2008).Furthermore, under EMH, no investor should be able to make greater earning that another with equal investment amounts because the fact that they have equal possession of information implies that they can only achieve similar returns.However, this is not true in practice, as it is evident that there is a wide range of returns on investments achieved by a universe of investors, investment funds and so on (Harder, 2008).