Annualised Forward Premium Calculator

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✖Forward Rate is the agreed-upon exchange rate for a future currency transaction, set today.ⓘ Forward Rate [F_R]			+10% -10%
✖Spot Rate is the current exchange rate for immediate currency exchange.ⓘ Spot Rate [S]			+10% -10%
✖No. of Days is the number of days over which the forward premium is annualized, typically 360 or 365 days.ⓘ No. of Days [n]			+10% -10%

✖Annualised Forward Premium is the difference between the forward exchange rate and the spot exchange rate, expressed as an annualised percentage.ⓘ Annualised Forward Premium [p]

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Annualised Forward Premium Solution

STEP 0: Pre-Calculation Summary

Formula Used

Annualised Forward Premium = (((Forward Rate-Spot Rate)/Spot Rate)*(360/No. of Days))*100
p = (((F_R-S)/S)*(360/n))*100
This formula uses 4 Variables

Variables Used

Annualised Forward Premium - Annualised Forward Premium is the difference between the forward exchange rate and the spot exchange rate, expressed as an annualised percentage.
Forward Rate - Forward Rate is the agreed-upon exchange rate for a future currency transaction, set today.
Spot Rate - Spot Rate is the current exchange rate for immediate currency exchange.
No. of Days - No. of Days is the number of days over which the forward premium is annualized, typically 360 or 365 days.

STEP 1: Convert Input(s) to Base Unit

Forward Rate: 102 --> No Conversion Required
Spot Rate: 99 --> No Conversion Required
No. of Days: 90 --> No Conversion Required

STEP 2: Evaluate Formula

Substituting Input Values in Formula

p = (((F_R-S)/S)*(360/n))*100 --> (((102-99)/99)*(360/90))*100

Evaluating ... ...

p = 12.1212121212121

STEP 3: Convert Result to Output's Unit

12.1212121212121 --> No Conversion Required

FINAL ANSWER

12.1212121212121 ≈ 12.12121 <-- Annualised Forward Premium

(Calculation completed in 00.004 seconds)

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Created by Keerthika Bathula

Indian Institute of Technology, Indian School of mines, Dhanbad (IIT ISM Dhanbad), Dhanbad

Keerthika Bathula has created this Calculator and 100+ more calculators!

Verified by Vishnu K

BMS College of Engineering (BMSCE), Bangalore

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< International Finance Calculators

Balance of Financial Account

LaTeX Go Balance of Financial Account = Net Direct Investment+Net Portfolio Investment+Asset Funding+Errors and Omissions

Covered Interest Rate Parity

LaTeX Go Forward Exchange Rate = (Current Spot Exchange Rate)*((1+Foreign Interest Rate)/(1+Domestic Interest Rate))

International Fisher Effect using Interest Rates

LaTeX Go Change in Exchange Rate = ((Domestic Interest Rate-Foreign Interest Rate)/(1+Foreign Interest Rate))

International Fischer Effect using Spot Rates

LaTeX Go Change in Exchange Rate = (Current Spot Exchange Rate/Spot Rate in Future)-1

Annualised Forward Premium Formula

LaTeX Go

Annualised Forward Premium = (((Forward Rate-Spot Rate)/Spot Rate)*(360/No. of Days))*100
p = (((F_R-S)/S)*(360/n))*100

What is Annualised Forward Premium?

The concept of the Annualised Forward Premium is vital in international finance and currency markets. It represents the difference between the forward exchange rate and the spot exchange rate, but crucially, it's adjusted to an annual basis to facilitate comparison and analysis. This premium or discount indicates market expectations regarding future currency movements. If the forward rate is higher than the spot rate, it suggests that the market anticipates the currency to appreciate in the future, thus reflecting a premium. Conversely, if the forward rate is lower than the spot rate, it implies an expected depreciation, resulting in a discount. Analysts and traders closely monitor this premium or discount as it provides insights into market sentiment and can influence investment decisions, hedging strategies, and risk management approaches in the dynamic realm of international finance.

How to Calculate Annualised Forward Premium?

Annualised Forward Premium calculator uses Annualised Forward Premium = (((Forward Rate-Spot Rate)/Spot Rate)*(360/No. of Days))*100 to calculate the Annualised Forward Premium, The Annualised Forward Premium formula is difference between forward exchange rate and the spot exchange rate, adjusted to an annual basis. Annualised Forward Premium is denoted by p symbol.

How to calculate Annualised Forward Premium using this online calculator? To use this online calculator for Annualised Forward Premium, enter Forward Rate (F_R), Spot Rate (S) & No. of Days (n) and hit the calculate button. Here is how the Annualised Forward Premium calculation can be explained with given input values -> 12.12121 = (((102-99)/99)*(360/90))*100.

FAQ

What is Annualised Forward Premium?

The Annualised Forward Premium formula is difference between forward exchange rate and the spot exchange rate, adjusted to an annual basis and is represented as p = (((F_R-S)/S)*(360/n))*100 or Annualised Forward Premium = (((Forward Rate-Spot Rate)/Spot Rate)*(360/No. of Days))*100. Forward Rate is the agreed-upon exchange rate for a future currency transaction, set today, Spot Rate is the current exchange rate for immediate currency exchange & No. of Days is the number of days over which the forward premium is annualized, typically 360 or 365 days.

How to calculate Annualised Forward Premium?

The Annualised Forward Premium formula is difference between forward exchange rate and the spot exchange rate, adjusted to an annual basis is calculated using Annualised Forward Premium = (((Forward Rate-Spot Rate)/Spot Rate)*(360/No. of Days))*100. To calculate Annualised Forward Premium, you need Forward Rate (F_R), Spot Rate (S) & No. of Days (n). With our tool, you need to enter the respective value for Forward Rate, Spot Rate & No. of Days and hit the calculate button. You can also select the units (if any) for Input(s) and the Output as well.

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