Could anyone explain to me the differnce between spot rates and forward rate? And when to use these two rates. Thx

Question 50 (DIHA-0040B) On December 12, year 1, Imp Co. entered into three forward exchange contracts, each to purchase 100,000 euros in ninety days. The relevant exchange rates are as follows: Spot rate $.87 Forward rate (for March 12, year 2) $.89 November 30, year 1 December 12, year 1 $.88 .90 December 31, year 1 $.92 .93 Imp entered into the second forward contract to hedge a commitment to purchase equipment being manufactured to Imp's specifications. The expected delivery date is March year 2 at which time settlement is due to the manufacturer. The hedge qualifies as a fair value hedge. At December 31, year 1, what amount of foreign currency transaction gain for just the forward contract should Imp include in net income? $0 Correct $3,000 Your Answer $5,000 $10,000 This Answer is Correct Hedges involving firm purchase commitments are treated in the same manner as a forward exchange contract that was entered into to hedge an exposure of a liability. Forward contract receivable 3,000 Forward contract gain 3,000 To revalue forward contract using forward rates Foreign exchange loss 3,000 Firm purchase commitment 3,000 To recognize loss on firm commitment Note that this hedge is 100% effective because the gain on the forward contract and the loss on the firm purchase commitment offset each other, net