Differentiate between spot and forward exchange rates.

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Differentiate between spot and forward exchange rates.

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Differentiate between spot and forward exchange rates.

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Spot rate is the purchase price paid to purchase a foreign currency for its immediate delivery. There should be a negligible time gap between the purchase and delivery of the currency. Whereas forward rate is the rate which is agreed to be paid, to buy foreign currency which would be delivered at a certain future day. Spot rate is always known as it is the current market exchange rate. Forward rate can only be an anticipated rate as it is subject to fluctuations, depending upon changes in bilateral trade between the countries.

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