Forward-Looking Term Rate

An interest rate set on a particular date (usually the interest determination date) at the beginning of the interest period.  For example, three-month U.S. dollar LIBOR is determined by reading the rate off of a Reuters screen and then the rate stays the same for the duration of the three-month interest period.  Backward-looking rates cannot be determined until the end of the interest period.  The advantage of a forward-looking term rate is that the interest rate and payment can be determined well in advance of the actual interest payment date, which provides certainty to issuers and investors.

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