Forward Premium Calculator

Written by Great Medico

Updated September 25, 2026 •2 min read

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The output from Forward Premium Calculator is a starting point for analysis, not a number to accept without context. Its value comes from being able to trace the result back to the exact form entries.

What this calculator does

Forward Premium Calculator annualizes the percentage difference between a forward exchange rate and the spot exchange rate over the entered forward tenor. It works from spot exchange rate, forward exchange rate, and forward tenor. For Forward Premium Calculator, because no outside market data is inserted, the result stays tied to the exact assumptions visible on the page.

How to use it

Use the form to supply Spot exchange rate, Forward exchange rate, and Forward tenor. Use the time unit shown for Forward tenor in Forward Premium Calculator; do not silently switch between years, months, or days. Before calculating, recheck Spot exchange rate, Forward exchange rate, Forward tenor against the source numbers you intend to analyze.

How the calculation works

Annualized forward premium = [(forward − spot) ÷ spot] × (12 ÷ months). The Forward Premium Calculator result follows the stated equation and the form values relevant to that calculation. For Forward Premium Calculator, the result is only meaningful for the exact values supplied, so input errors should be corrected before interpretation.

Example

If spot is 1.20, the 6-month forward is 1.23, the unannualized premium is 2.5% and the simple annualized forward premium is 5%. The Forward Premium Calculator example is a math check only; your result should come from the values entered on the form.

How to interpret the result

A positive result means the forward quote is above spot under the quote convention entered; a negative result indicates a forward discount. Read the Forward Premium Calculator output as the specific relationship calculated from the form, not as a complete investment or credit decision by itself.

Limitations and notes

This is a simple annualized rate from two FX quotes. It does not identify arbitrage, account for bid–ask spreads, compounding conventions, transaction costs, credit exposure, or whether the quote convention should be inverted for a particular market. If you revisit Forward Premium Calculator later, refresh the displayed inputs instead of carrying an old result forward.