How to Calculate Interest Rate Parity?
Interest Rate Parity calculator uses Forward Rate Constant = Spot Exchange Rate*((1+Interest Rate of Quote Currency)/(1+Interest Rate of Base Currency)) to calculate the Forward Rate Constant, The Interest Rate Parity formula is defined as a theory according to which the interest rate differential between two countries is equal to the differential between the forward exchange rate and the spot exchange rate. Forward Rate Constant is denoted by kf symbol.
How to calculate Interest Rate Parity using this online calculator? To use this online calculator for Interest Rate Parity, enter Spot Exchange Rate (Sp), Interest Rate of Quote Currency (IQ) & Interest Rate of Base Currency (IB) and hit the calculate button. Here is how the Interest Rate Parity calculation can be explained with given input values -> 27.25191 = 21*((1+16)/(1+12.1)).