3Classical Mathematical Models in Financial Engineering and Modern Portfolio Theory
3.1 An Introduction to the Cost of Money in the Financial Market
The Prevailing Financial Scenery
Much of financial engineering depends on an understanding of the perceived behavior of the financial market, particularly the stock markets that include daily trading of corporate and governmental stocks, bonds, mutual funds, derivatives, and many other commodities.
Some Current Observations in the United States: As of August 11, 2016
- Financial Interest Rates: The Cost of Money
A typical local (California) federally insured credit union is advertising the following typical savings and lending rates for the month of July, 2016:
Money market savings account, dividend rate: 0.85% per annum Free checking account, dividend rate: 0.25% per annum Certificate account rate, dividend rate: 1.00% per annum Secured real estate loan rate: 4.00% per annum Credit card loan rate: 8.75% per annum Remark: It certainly should not escape one's attention that such low levels of dividend rates in ordinary savings accounts may well be a prime incentive for one's interests in seeking higher returns in other avenues within the financial market or elsewhere!
- The Financial News Media
CNN reported in http://money.cnn.com that there are “5 Reasons Why Stocks May Keep Going Higher”:
“Most major stock market indexes in the U.S. are trading near their all-time highs. So why do so many investors…and even ...
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