Spot interest rate

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Spot interest rate

Interest rate fixed today on a loan that is made today. Related: Forward interest rates.

Spot Interest Rate

The interest rate for loans and debt securities issued at a given time. The advantage of borrowing at the spot interest rate is the fact that it is a known quantity and one can amortize the loan accordingly. The risk of the spot interest rate is that interest rates may rise or fall in the future to the disadvantage of one of the parties to a contract. Some investors speculate on the difference between a spot interest rate and a forward interest rate.
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The term structure of interest rates or zero-coupon yield curve characterizes relation between spot interest rates in the economy and the term to maturity of default-free fixed income securities in the market.