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Forward Rate Formula

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Forward Rate is the interest rate applicable to a financial transaction that is scheduled to take place in the future. Check FAQs

F o = Sp \cdot \ln ((r d - r f) \cdot T)

F_o - Forward Rate?Sp - Spot Exchange Rate?r_d - Domestic Interest Rate?r_f - Foreign Interest Rate?T - Time to Maturity?

Forward Rate Example

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Here is how the Forward Rate equation looks like with Values.

Here is how the Forward Rate equation looks like with Units.

Here is how the Forward Rate equation looks like.

40.8641 = 21 \cdot \ln ((0.9 - 0.2) \cdot 10)

40.8641 = 21 \cdot \ln ((0.9 - 0.2) \cdot 10)

40.8641 = 21 \cdot \ln ((0.9 - 0.2) \cdot 10)

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Forward Rate Solution

Follow our step by step solution on how to calculate Forward Rate?

FIRST Step Consider the formula

F o = Sp \cdot \ln ((r d - r f) \cdot T)

Next Step Substitute values of Variables

∴

F o = 21 \cdot \ln ((0.9 - 0.2) \cdot 10)

Next Step Prepare to Evaluate

∴

F o = 21 \cdot \ln ((0.9 - 0.2) \cdot 10)

Next Step Evaluate

∴

F o = 40.8641131301616

LAST Step Rounding Answer

∴

F o = 40.8641

Forward Rate Formula Elements

Variables

Functions

Forward Rate

Forward Rate is the interest rate applicable to a financial transaction that is scheduled to take place in the future.

Symbol: F_o

Measurement: NAUnit: Unitless

Note: Value should be greater than 0.

Formulas to find Forward Rate

Spot Exchange Rate

Spot Exchange Rate is the current amount one currency will trade for another currency at a specific point in time.

Symbol: Sp

Measurement: NAUnit: Unitless

Note: Value should be greater than 0.

Formulas to find Spot Exchange Rate

Domestic Interest Rate

Domestic Interest Rate refers to the interest rate applicable to financial instruments within a particular country.

Symbol: r_d

Measurement: NAUnit: Unitless

Note: Value should be greater than 0.

Formulas to find Domestic Interest Rate

Foreign Interest Rate

Foreign Interest Rate refers to the prevailing interest rates in a foreign country.

Symbol: r_f

Measurement: NAUnit: Unitless

Note: Value should be greater than 0.

Formulas to find Foreign Interest Rate

Time to Maturity

Time to Maturity is the time required to mature a bond.

Symbol: T

Measurement: NAUnit: Unitless

Note: Value can be positive or negative.

Formulas to find Time to Maturity

The natural logarithm, also known as the logarithm to the base e, is the inverse function of the natural exponential function.

Syntax: ln(Number)

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How to Evaluate Forward Rate?

Forward Rate evaluator uses Forward Rate = Spot Exchange Rate*ln((Domestic Interest Rate-Foreign Interest Rate)*Time to Maturity) to evaluate the Forward Rate, The Forward Rate formula is defined as the exchange rate at which a currency can be exchanged for another currency at a future date. It is determined by the interest rate differentials between the two currencies involved. Forward Rate is denoted by F_o symbol.

How to evaluate Forward Rate using this online evaluator? To use this online evaluator for Forward Rate, enter Spot Exchange Rate (Sp), Domestic Interest Rate (r_d), Foreign Interest Rate (r_f) & Time to Maturity (T) and hit the calculate button.

FAQs on Forward Rate

What is the formula to find Forward Rate?

The formula of Forward Rate is expressed as Forward Rate = Spot Exchange Rate*ln((Domestic Interest Rate-Foreign Interest Rate)*Time to Maturity). Here is an example- 40.86411 = 21*ln((0.9-0.2)*10).

How to calculate Forward Rate?

With Spot Exchange Rate (Sp), Domestic Interest Rate (r_d), Foreign Interest Rate (r_f) & Time to Maturity (T) we can find Forward Rate using the formula - Forward Rate = Spot Exchange Rate*ln((Domestic Interest Rate-Foreign Interest Rate)*Time to Maturity). This formula also uses Natural Logarithm (ln) function(s).

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Forward Rate Formula

Forward Rate Example

Forward Rate Solution

Forward Rate Formula Elements

Other formulas in Forex Management category

How to Evaluate Forward Rate?

FAQs on Forward Rate

Variable Name