Forward Rate Calculator

✖Spot Exchange Rate is the current amount one currency will trade for another currency at a specific point in time.ⓘ Spot Exchange Rate [Sp]			+10% -10%
✖Domestic Interest Rate refers to the interest rate applicable to financial instruments within a particular country.ⓘ Domestic Interest Rate [r_d]			+10% -10%
✖Foreign Interest Rate refers to the prevailing interest rates in a foreign country.ⓘ Foreign Interest Rate [r_f]			+10% -10%
✖Time to Maturity is the time required to mature a bond.ⓘ Time to Maturity [T]			+10% -10%

✖Forward Rate is the interest rate applicable to a financial transaction that is scheduled to take place in the future.ⓘ Forward Rate [F_o]

⎘ Copy

👎

Formula

✖

Forward Rate

Formula

F o = Sp \cdot \ln ((r d - r f) \cdot T)

Example

40.86411 = 21 \cdot \ln ((0.90 - 0.20) \cdot 10)

Calculator

LaTeX

Reset

👍

Download Forex Management Formulas PDF PDF Image

Forward Rate Solution

STEP 0: Pre-Calculation Summary

Formula Used

Forward Rate = Spot Exchange Rate*ln((Domestic Interest Rate-Foreign Interest Rate)*Time to Maturity)
F_o = Sp*ln((r_d-r_f)*T)
This formula uses 1 Functions, 5 Variables

Functions Used

ln - The natural logarithm, also known as the logarithm to the base e, is the inverse function of the natural exponential function., ln(Number)

Variables Used

Forward Rate - Forward Rate is the interest rate applicable to a financial transaction that is scheduled to take place in the future.
Spot Exchange Rate - Spot Exchange Rate is the current amount one currency will trade for another currency at a specific point in time.
Domestic Interest Rate - Domestic Interest Rate refers to the interest rate applicable to financial instruments within a particular country.
Foreign Interest Rate - Foreign Interest Rate refers to the prevailing interest rates in a foreign country.
Time to Maturity - Time to Maturity is the time required to mature a bond.

STEP 1: Convert Input(s) to Base Unit

Spot Exchange Rate: 21 --> No Conversion Required
Domestic Interest Rate: 0.9 --> No Conversion Required
Foreign Interest Rate: 0.2 --> No Conversion Required
Time to Maturity: 10 --> No Conversion Required

STEP 2: Evaluate Formula

Substituting Input Values in Formula

F_o = Sp*ln((r_d-r_f)*T) --> 21*ln((0.9-0.2)*10)

Evaluating ... ...

F_o = 40.8641131301616

STEP 3: Convert Result to Output's Unit

40.8641131301616 --> No Conversion Required

FINAL ANSWER

40.8641131301616 ≈ 40.86411 <-- Forward Rate

(Calculation completed in 00.004 seconds)

You are here -

Home » Financial » Investment » Forex Management » Forward Rate

Credits

Created by Vishnu K

BMS College of Engineering (BMSCE), Bangalore

Vishnu K has created this Calculator and 200+ more calculators!

Verified by Nayana Phulphagar

Institute of Chartered and Financial Analysts of India National college (ICFAI National College), HUBLI

Nayana Phulphagar has verified this Calculator and 1500+ more calculators!

< 5 Forex Management Calculators

Black-Scholes-Merton Option Pricing Model for Call Option

Go Theoretical Price of Call Option = Current Stock Price*Normal Distribution*(Cumulative Distribution 1)-(Option Strike Price*exp(-Risk Free Rate*Time to Expiration of Stock))*Normal Distribution*(Cumulative Distribution 2)

Cumulative Distribution One

Go Cumulative Distribution 1 = (ln(Current Stock Price/Option Strike Price)+(Risk Free Rate+Volatile Underlying Stock^2/2)*Time to Expiration of Stock)/(Volatile Underlying Stock*sqrt(Time to Expiration of Stock))

Black-Scholes-Merton Option Pricing Model for Put Option

Go Theoretical Price of Put Option = Option Strike Price*exp(-Risk Free Rate*Time to Expiration of Stock)*(-Cumulative Distribution 2)-Current Stock Price*(-Cumulative Distribution 1)

Cumulative Distribution Two

Go Cumulative Distribution 2 = Cumulative Distribution 1-Volatile Underlying Stock*sqrt(Time to Expiration of Stock)

Interest Rate Parity

Go Forward Rate Constant = Spot Exchange Rate*((1+Interest Rate of Quote Currency)/(1+Interest Rate of Base Currency))

Forward Rate Formula

Forward Rate = Spot Exchange Rate*ln((Domestic Interest Rate-Foreign Interest Rate)*Time to Maturity)
F_o = Sp*ln((r_d-r_f)*T)

What is Forward Rate?

This formula assumes that there are no transaction costs, no restrictions on capital flows, and no differences in risk between the two currencies. Additionally, it assumes that interest is compounded continuously.

Here's a step-by-step breakdown of the forward rate calculation:

*Identify the Spot Rate (S):
The spot rate is the current exchange rate between the two currencies.
*Determine the Domestic Interest Rate (r_{\text{domestic}}):
This is the interest rate in the country where you are calculating the forward rate.
*Determine the Foreign Interest Rate (r_{\text{foreign}}):
This is the interest rate in the foreign country.
*Identify the Time to Maturity (t):
This represents the time remaining until the date at which the currency exchange will occur.
*Apply the Formula:
Plug the values into the interest rate parity formula to calculate the forward rate.

How to Calculate Forward Rate?

Forward Rate calculator uses Forward Rate = Spot Exchange Rate*ln((Domestic Interest Rate-Foreign Interest Rate)*Time to Maturity) to calculate the Forward Rate, The Forward Rate formula is defined as the exchange rate at which a currency can be exchanged for another currency at a future date. It is determined by the interest rate differentials between the two currencies involved. Forward Rate is denoted by F_o symbol.

How to calculate Forward Rate using this online calculator? To use this online calculator for Forward Rate, enter Spot Exchange Rate (Sp), Domestic Interest Rate (r_d), Foreign Interest Rate (r_f) & Time to Maturity (T) and hit the calculate button. Here is how the Forward Rate calculation can be explained with given input values -> 40.86411 = 21*ln((0.9-0.2)*10).

FAQ

What is Forward Rate?

The Forward Rate formula is defined as the exchange rate at which a currency can be exchanged for another currency at a future date. It is determined by the interest rate differentials between the two currencies involved and is represented as F_o = Sp*ln((r_d-r_f)*T) or Forward Rate = Spot Exchange Rate*ln((Domestic Interest Rate-Foreign Interest Rate)*Time to Maturity). Spot Exchange Rate is the current amount one currency will trade for another currency at a specific point in time, Domestic Interest Rate refers to the interest rate applicable to financial instruments within a particular country, Foreign Interest Rate refers to the prevailing interest rates in a foreign country & Time to Maturity is the time required to mature a bond.

How to calculate Forward Rate?

The Forward Rate formula is defined as the exchange rate at which a currency can be exchanged for another currency at a future date. It is determined by the interest rate differentials between the two currencies involved is calculated using Forward Rate = Spot Exchange Rate*ln((Domestic Interest Rate-Foreign Interest Rate)*Time to Maturity). To calculate Forward Rate, you need Spot Exchange Rate (Sp), Domestic Interest Rate (r_d), Foreign Interest Rate (r_f) & Time to Maturity (T). With our tool, you need to enter the respective value for Spot Exchange Rate, Domestic Interest Rate, Foreign Interest Rate & Time to Maturity and hit the calculate button. You can also select the units (if any) for Input(s) and the Output as well.

Home

FREE PDFs

🔍 Search