Spot Rate vs. Forward Rates (Calculations for CFA® and FRM® Exams)

AnalystPrep's Concept Capsules for CFA® and FRM® Exams
This series of video lessons is intended to review the main calculations required in your CFA and FRM exams.

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Spot Rates
A spot interest rate gives you the price of a financial contract on the spot date. The spot date is the day when the funds involved in a business transaction are transferred between the parties involved.

Forward Rates
In theory, forward rates are prices of financial transactions that might take place at some future point. A forward rate indicates the interest rate on a loan beginning at some time in the future, whereas a spot rate is the interest rate on a loan beginning immediately. Thus, the forward market rate is for future delivery after the usual settlement time in the cash market.

Implied Forward Rates
Implied forward rates are the break-even reinvestment rate calculated from the spot rates.