Forward Rate: Definition & Formula


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question 1 of 3

A forward exchange rate is a rate relating to _____.

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1. Forward interest rate contracts are executed through two simultaneous commitments of _____.

2. Hedging is a form of investment that _____.

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About This Quiz & Worksheet

Answer these questions to find out what you remember about forward exchange rates. You will be quizzed on how this rate is created and used.

Quiz & Worksheet Goals

In this quiz/worksheet set, you'll measure your knowledge and understanding of:

  • The purpose of hedging in investment
  • How these rates are executed
  • The way forward exchange rates are created

Skills Practiced

  • Reading comprehension - ensure that you draw the most important information from the material, such as why forward exchange rates are used
  • Defining key concepts - ensure that you can accurately define main terms, such as hedging
  • Information recall - access the knowledge you've gained regarding the method by which forward exchange rates are executed

Additional Learning

If you would like to learn more about this type of financial instrument, watch or read the lesson titled Forward Rate: Definition & Formula. It will help you understand:

  • The purpose of a spot rate
  • Examples of companies using future yield bonds
  • How forward interest and exchange rates are calculated