Forward Premium Calculator

How to use this forward premium calculator

What this calculator does

This calculator measures how far a currency forward quote sits above or below the current spot quote, expressed as a percentage of the spot rate. It also annualizes that percentage using a 360-day year so contracts with different maturities can be compared on a common basis. The calculation describes the pricing relationship between two quotes; it is not a forecast of the future spot rate, an investment recommendation, or a complete valuation of a forward contract.

When to use it

Use it when you want to compare a quoted forward exchange rate with today's spot rate, check whether a forward is trading at a premium or discount, normalize two forward quotes with different maturities, or document an FX assumption for treasury, budgeting, or hedging analysis. For public examples of spot exchange-rate reporting, the Federal Reserve's H.10 foreign exchange rate release shows how bilateral spot quotes are published.

How to calculate

1. The calculator opens with a ready-to-use demonstration: spot rate 1.1859, forward rate 1.1885, and a 90-day contract. The example Excel workbook is immediately available.
2. Replace Spot rate and Forward rate with quotes for the same currency pair and the same quote direction. Results update as you type.
3. Enter the Forward contract duration in whole calendar days. This does not change the non-annualized premium; it only changes the annualized result.
4. Read Forward premium first, then Annualized forward premium. Positive values indicate a premium under the entered quote convention; negative values indicate a discount; zero means the spot and forward quotes are equal.
5. Select Download Excel to export the current validated inputs and outputs as an XLSX workbook. Reset clears the demonstration values and results; after Reset, Excel download remains unavailable until all three required fields form a complete valid state again.

Input guide

Spot rate is required. Enter a positive decimal such as 1.1859, using a period for the decimal separator and no currency symbol, grouping comma, or scientific notation. A higher spot rate, with the forward rate unchanged, reduces the computed premium and can turn it into a discount. A common mistake is mixing quote directions, such as entering one rate as EUR/GBP and the other as GBP/EUR.

Forward rate is required. Enter a positive decimal such as 1.1885 in exactly the same quote convention as the spot rate. Holding spot constant, a higher forward rate increases the premium. Do not enter forward points in this field; it expects the outright forward exchange rate.

Forward contract duration is required. Enter a whole number of days from 1 to 36,500, for example 90. A shorter duration magnifies the annualized percentage for a given forward premium, while a longer duration reduces it. Zero days cannot be annualized and is rejected.

Output guide

Forward premium is the relative difference between the forward and spot rates, displayed to two decimal places as a percentage. It is driven only by the two exchange-rate inputs. A value above zero means the forward quote is higher than spot; below zero means a discount; exactly zero means the two entered rates are at par.

Annualized forward premium takes the same premium and multiplies it by 360 / days. It is also displayed as a percentage and is driven by all three inputs. Annualization is a comparison convention, not a promise of a one-year return. The Bank for International Settlements explains the relationship between spot and forward exchange rates and forward points, which provides market context for comparing the two quotes.

The summary pills repeat the current spot rate, forward rate, contract term, and premium/discount status. The Calculation detail table repeats the same model values and identifies what each measure means; it does not introduce a separate calculation.

Worked example

With a spot rate of 1.1859 and a forward rate of 1.1885, the forward premium is (1.1885 - 1.1859) / 1.1859 = 0.0021924, or 0.22% when displayed to two decimals. For a 90-day contract, annualization gives 0.0021924 × (360 / 90) = 0.0087697, shown as 0.88%. Those are the exact first-open results in the calculator and workbook.

Learn more

Forward premiums are closely related to interest-rate differentials and covered interest parity in standard FX theory, but market conventions, transaction costs, liquidity, and credit considerations can matter in practice. Use the calculator to compare quoted rates consistently, then consult the underlying market data and contract terms before drawing conclusions.