Forward Price

(post from old site)

What is Forward Price?
the AGREED price to buy something in the FUTURE.

Why is Forward Price > Spot price?
Intuitively:
say the underlying is worth $100.  if you enter a forward contract to buy that underlying at $100 in 1 year, u will have the freedom to spend/invest that $100 this year (and make interest).  this advantage is priced into the forward price so that's why forward price > spot price. 

Mathematically: 
Arbitrage.
if that's not the case, you'd:
@t=0
enter into the forward contract
short sell the underlying at spot price
lend the $ from above
@t=1

buy the underlying as per the forward contract at forward price determined t=0
use that underlying to even the short sell
receive the $ + interest  (proceed of this is to use to buy the contract in 1. above)
Say if the forward price = spot price at t=0, you'd execute the above and risk-free profit (interest from lending the $)!!  :D
So forward price has to = spot price (1 + r) so that no arbitrage to happen.