ComparisonIntermediate
What is the difference between a spot exchange rate and a forward exchange rate as defined in the chapter?
A spot exchange rate is the rate at which currencies are exchanged for immediate delivery, typically within two days. In contrast, a forward exchange rate is an agreed-upon rate for currency exchange at a specified future date, such as 30, 90, or 180 days from the agreement.
Key points
- Spot exchange rates are for immediate delivery of currency, usually within two days.
- Forward exchange rates are set for delivery at a future date, typically ranging from 30 to 180 days.
- Spot rates reflect current market conditions, while forward rates lock in prices to mitigate exchange rate risk.
Source:Fundamentals of Financial Management, Concise Edition· Multinational Financial Management· p. 634–636
Related questions
Fundamentals of Financial Management, Concise Edition
Fundamentals of Financial Management, Concise Edition
Eugene F. Brigham, Joel F. Houston
9e · Cengage Learning