Forward rate -exchange rate, Marketing Research

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Forward Rate : The rate quoted for delivery of foreign exchange in future at some agreed date, i.e., when the value date is more than two business days in future, is called the forward rate. A forward bank enters into a contract to buy/sell a fixed amount of foreign currency at a specified future date at a predetermined rate of exchange. The rate quoted for the transaction is the forward rate.

The date of delivery of foreign exchange in future or the maturity of a forward foreign exchange contract can be a few days, months or years in some cases. The exchange rate is fixed at the time the transaction is agreed upon. But no money actually changes hands until the maturity date. There will be a specific exchange rate for each forward maturity and each of these rates almost always will differ from today's spot exchange rate.

 


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