Spot Rate and Bonds

We have encountered the spot rate before in these financial and money management and market related articles.

As for the spot rate, we know that this is the rate of interest that the market demands for money from now to a date in the future that is specified, for instance it could be the rate for one weeks money, or even six months or several years worth of money.

Therefore if you invest money today then you would do so at what rate?

The answer of course is you would invest that money at today's spot rate, if you invest it for a year then you would do so at today's one year spot rate, and so on and so forth.

There are interesting links between spot rates and bond yields and those with a particular interest in this are encouraged to look into it further.

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