What is Annualised Forward Premium?
The concept of the Annualised Forward Premium is vital in international finance and currency markets. It represents the difference between the forward exchange rate and the spot exchange rate, but crucially, it's adjusted to an annual basis to facilitate comparison and analysis. This premium or discount indicates market expectations regarding future currency movements. If the forward rate is higher than the spot rate, it suggests that the market anticipates the currency to appreciate in the future, thus reflecting a premium. Conversely, if the forward rate is lower than the spot rate, it implies an expected depreciation, resulting in a discount. Analysts and traders closely monitor this premium or discount as it provides insights into market sentiment and can influence investment decisions, hedging strategies, and risk management approaches in the dynamic realm of international finance.
How to Calculate Annualised Forward Premium?
Annualised Forward Premium calculator uses Annualised Forward Premium = (((Forward Rate-Spot Rate)/Spot Rate)*(360/No. of Days))*100 to calculate the Annualised Forward Premium, The Annualised Forward Premium formula is difference between forward exchange rate and the spot exchange rate, adjusted to an annual basis. Annualised Forward Premium is denoted by p symbol.
How to calculate Annualised Forward Premium using this online calculator? To use this online calculator for Annualised Forward Premium, enter Forward Rate (F_{R}), Spot Rate (S) & No. of Days (n) and hit the calculate button. Here is how the Annualised Forward Premium calculation can be explained with given input values -> 12.12121 = (((102-99)/99)*(360/90))*100.