# Forward Premium Calculator

URL: https://speedycalculator.com/calculators/finance/forward-premium/
Last updated: 2026-10-25

> The forward premium calculator works out how much a currency's forward exchange rate is above (premium) or below (discount) the spot rate, as a percentage and annualized.

## Inputs

- Spot rate
- Forward rate
- Forward contract duration (days)
- Day count

## Results

- Forward premium (period)
- Annualized forward premium
- Type

## Formula

```
Forward premium = (forward rate − spot rate) ÷ spot rate
Annualized premium = premium × 360 ÷ days
```

## Explanation

Under interest rate parity, the currency with the lower interest rate trades at a forward premium. Businesses use forwards to lock in exchange rates for future payments.

### How to use the Forward Premium Calculator

- **Spot rate**
- **Forward rate**
- **Forward contract duration**
- **Day count**

Results update as you type, and every field accepts the units shown in its menu.

### How it works

Enter the spot rate, the forward rate and the length of the forward contract in days.

### Tips

- Use annualised volatility and interest rates as decimals per year.
- Remember that one standard option contract usually covers 100 shares.
- Options lose time value as expiry approaches – re-run the numbers as dates change.
- Derivatives can lose more than you expect; understand the maximum loss before trading.

### Common mistakes to avoid

- Mixing days and years for time to expiry.
- Ignoring commissions and the bid–ask spread.
- Forgetting dividends when pricing options on dividend-paying stocks.

### Inputs explained

FieldWhat to enterSpot rateA numberForward rateA numberForward contract durationIn daysDay countChoose one: 360 days, 365 days

### What each result means

- **Forward premium (period)** = ([Forward rate] - [Spot rate])÷[Spot rate]×100
- **Annualized forward premium** = ([Forward rate] - [Spot rate])÷[Spot rate]×[Day count]÷[Forward contract duration]×100

### Example values

How the main result changes when **Spot rate** changes and everything else stays at the example values above:

Spot rateAnnualized forward premium (%)0.5425202.5810.813868.3871.091.291.36-38.9681.63-65.8062.17-99.355

## Worked example

Inputs — Spot rate: 1.085; Forward rate: 1.092; Forward contract duration: 180 days; Day count: 360 days.

Results — Forward premium (period) = 0.645 %; **Annualized forward premium = 1.29 %**; Type = Premium.

## FAQ

**What is a forward premium?**
When the forward rate is above the spot rate.

**What causes it?**
Interest rate differences between the two currencies.

**What is a forward discount?**
When the forward rate is below the spot rate.

**What formula does the Forward Premium Calculator use?**
Forward premium = (forward rate − spot rate) ÷ spot rate.