Quickly determine the forward premium or discount for any currency pair with our easy-to-use tool. This calculator helps forex traders, investors, and businesses understand the annualized cost or benefit of hedging currency risk using forward contracts, based on spot rates, forward rates, and interest rate differentials.
Formula:
The formula used to calculate the Annualized Forward Premium/Discount is:
P = [ (F - S) / S ] * (365 / D) * 100
Where:
- P = Annualized Forward Premium/Discount (as a percentage)
- F = Forward Exchange Rate (e.g., USD/EUR 1.12)
- S = Spot Exchange Rate (e.g., USD/EUR 1.10)
- D = Days to Maturity of the forward contract