If a firm is planning to borrow money in the future, the rate it is trying to lock in is
A) the current forward rate
B) the current spot rate
C) the difference between the spot rate and the forward rate
D) the forward rate at the termination of the hedge
E) none of the above

Question

Quizplus · Accepted Answer

The current forward rate is the rate that the firm can lock in for a future borrowing. It represents the expected future rate and allows the firm to hedge against potential interest rate increases.

If a Firm Is Planning to Borrow Money in the Future