Forward Rate

A forward rate is a financial term that refers to the agreed-upon interest rate for a loan or investment that will occur in the future, rather than the present. It reflects expectations about future market conditions, such as inflation or economic growth. For example, if you agree today to borrow money at a certain rate starting in a year, that rate is the forward rate. This concept is important in finance for hedging risks and making investment decisions, as it helps people understand potential future costs or returns based on current information.