Implied Rate

AAA

DEFINITION of 'Implied Rate'

An interest rate that is determined by the difference between the spot rate and the forward/futures rate. The degree of relative costliness of a future rate can be assessed by comparing the implied rate with the spot rate.

Calculated as:

Implied Rate

INVESTOPEDIA EXPLAINS 'Implied Rate'

For example, if the present spot rate of LIBOR is 5% and the forward rate for LIBOR is 6%, the implied rate is 1%. This situation merits the impression that the future rate for borrowing will be more expensive.

RELATED TERMS
  1. LIBOR

    LIBOR or ICE LIBOR (previously BBA LIBOR) is a benchmark rate ...
  2. Spot Price

    The current price at which a particular security can be bought ...
  3. Forward Rate

    A rate applicable to a financial transaction that will take place ...
  4. Interest Rate

    The amount charged, expressed as a percentage of principal, by ...
  5. Cash-And-Carry Trade

    A trading strategy in which an investor buys a long position ...
  6. ISDA Master Agreement

    A standard agreement used in over-the-counter derivatives transactions.
Related Articles
  1. Getting Started In Foreign Exchange ...
    Forex Education

    Getting Started In Foreign Exchange ...

  2. Futures Fundamentals
    Insurance

    Futures Fundamentals

  3. Curious About Stock Index Futures? Read ...
    Options & Futures

    Curious About Stock Index Futures? Read ...

  4. The Best Day-Trading Schools
    Trading Strategies

    The Best Day-Trading Schools

comments powered by Disqus
Hot Definitions
  1. Walras' Law

    An economics law that suggests that the existence of excess supply in one market must be matched by excess demand in another ...
  2. Market Segmentation

    A marketing term referring to the aggregating of prospective buyers into groups (segments) that have common needs and will ...
  3. Effective Annual Interest Rate

    An investment's annual rate of interest when compounding occurs more often than once a year. Calculated as the following: ...
  4. Debit Spread

    Two options with different market prices that an investor trades on the same underlying security. The higher priced option ...
  5. Odious Debt

    Money borrowed by one country from another country and then misappropriated by national rulers. A nation's debt becomes odious ...
  6. Takeover

    A corporate action where an acquiring company makes a bid for an acquiree. If the target company is publicly traded, the ...
Trading Center