Finance

Instant, private, and free

Forward Premium Calculator.

Calculate annualized forward premium from spot and forward rates.

On-device calculationNo signup
01

Set your values

Results update as you type.

Forward premium / discount: 10.000%

Forward premium / discount

0.000%
Annualized premium / discount: 4.881%

Annualized premium / discount

0.000%

FAQs

How does the forward premium calculator work?

Enter the requested values to see a deterministic result. Assumptions are explicit and no live market or tax data is fetched.

Use Cases

Comparing Investment Opportunities

Assess whether investing in a foreign currency is attractive by comparing the forward premium to interest rate differentials.

Example: If the forward premium on GBP/USD is 1.5% and U.S. interest rates are 2%, the net return may be lower, guiding investment decisions.

Frequently Asked Questions

What is a forward premium?
A forward premium occurs when the forward exchange rate is higher than the spot rate, indicating the market expects the currency to appreciate. It is expressed as an annualized percentage and reflects interest rate differentials.
How is forward premium calculated?
The forward premium is calculated as (Forward Rate - Spot Rate) / Spot Rate * (360 / Days) * 100, where Days is the forward contract period. A positive result indicates a premium, negative a discount.
Why is forward premium important?
It helps businesses and investors hedge currency risk, compare investment returns across currencies, and gauge market expectations of future exchange rates. It also influences pricing of forward contracts.

Tips & Common Mistakes

Tips

  • Ensure both spot and forward rates are quoted in the same base currency and for the same currency pair.
  • Use the exact number of days in the forward contract (e.g., 30, 90, 180) for accurate annualization.
  • Remember that a negative forward premium (discount) means the forward rate is lower than spot, indicating expected depreciation.
  • Check if the rates are direct or indirect quotes; the formula assumes direct quotes (domestic per foreign).

Common Mistakes to Avoid

  • Using the wrong number of days (e.g., 360 vs. 365) can skew the annualized percentage.
  • Confusing premium and discount: a positive result is a premium, negative is a discount.
  • Forgetting to convert the result to a percentage by multiplying by 100.

Last updated: August 13, 2026