Forward rate
Definition
A projection of future interest rates calculated from either spot rates or the yield curve. For example, suppose the one-year government bond was yielding 2% and the two-year bond was yielding 4%. The one year forward rate represents the one-year interest rate one year from now. You would solve the formula (1.04)^2=(1.02)(1+F). F is 6.03%.
Investing Essentials
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Getting Started In Stocks
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The NASDAQ Dozen
Learning Markets
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The 10 Commandments Of Investing
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The Lowdown On Penny Stocks
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10 Things To consider Before Selecting An Online Broker
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Start Investing With Only $1,000
Investopedia
Copyright © 2011 Campbell R. Harvey, Professor of Finance, Fuqua School of Business at Duke University
Term of the Day
Overwriting
A speculative option strategy that involves selling call or put options on stocks that are believed to be overpriced or underpriced; the options are expected not to be exercised.
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