# Forward Rate Calculator

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

> The forward rate calculator works out the implied interest rate between two future dates from two spot rates (zero rates) of different maturities – the rate you could lock in today for a future period.

## Inputs

- Time period 1 (years)
- Spot rate for period 1 (%)
- Time period 2 (years)
- Spot rate for period 2 (%)

## Results

- Forward rate
- Forward period length

## Formula

```
Forward rate f = [(1 + S₂)^n₂ ÷ (1 + S₁)^n₁]^(1 ÷ (n₂ − n₁)) − 1
```

## Explanation

If the 1-year rate is 4% and the 2-year rate is 4.5%, investing for two years must equal investing for one year and then at the forward rate for the second – about 5%. Forward rates reveal what the yield curve implies about future rates.

### How to use the Forward Rate Calculator

- **Time period 1**
- **Spot rate for period 1**
- **Time period 2**
- **Spot rate for period 2**

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

### How it works

Enter the first time period and its spot rate, and the second (longer) period and its spot rate.

### 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 enterTime period 1In yearsSpot rate for period 1In %Time period 2In yearsSpot rate for period 2In %

### What each result means

- **Forward rate** = (((1 + [Spot rate for period 2]÷100)^[Time period 2]÷(1 + [Spot rate for period 1]÷100)^[Time period 1])^(1÷([Time period 2] - [Time period 1])) - 1)×100
- **Forward period length** = [Time period 2] - [Time period 1]

### Example values

How the main result changes when **Time period 1** changes and everything else stays at the example values above:

Time period 1 (years)Forward rate (%)0.54.66720.754.801215.00241.255.33871.56.0145

## Worked example

Inputs — Time period 1: 1 years; Spot rate for period 1: 4 %; Time period 2: 2 years; Spot rate for period 2: 4.5 %.

Results — **Forward rate = 5.0024 %**; Forward period length = 1 years.

## FAQ

**What is a forward rate?**
An interest rate for a future period implied by today's spot rates.

**How is it calculated?**
From the ratio of compounded spot rates of two maturities.

**Is the forward rate a forecast?**
It reflects expectations plus a term premium, so it's not a pure forecast.

**What formula does the Forward Rate Calculator use?**
Forward rate f = [(1 + S₂)^n₂ ÷ (1 + S₁)^n₁]^(1 ÷ (n₂ − n₁)) − 1.