Forward Premium Calculator
Forward Premium Calculator helps determine the forward premium or discount between two currencies, based on the spot rate and forward rate. It assists traders and investors in understanding currency pricing in forward contracts.
Calculate Forward Premium
What is Forward Premium Calculator?
A Forward Premium Calculator is a tool that helps calculate the forward premium or discount between two currencies. It compares the spot exchange rate with the forward exchange rate to find the difference, which indicates if a currency is trading at a premium or discount.
How to Use Forward Premium Calculator?
To use the Forward Premium Calculator, enter the spot rate and the forward rate of the currency pair. The tool will then calculate the percentage difference between these rates, providing you with the forward premium or discount.
What is the Formula of Forward Premium Calculator?
The formula to calculate Forward Premium is:
Forward Premium = ((Forward Rate - Spot Rate) / Spot Rate) * 100
Advantages of Using Forward Premium Calculator
- Helps traders and investors predict currency movements.
- Useful for hedging foreign exchange risk in international business.
- Quick and accurate way to determine currency premium or discount.
Disadvantages of Forward Premium Calculator
- Does not take into account other market factors such as interest rates and geopolitical risks.
- Can be inaccurate if the spot or forward rates are not updated regularly.
- Relies on the assumption of market efficiency.