Interest-rate parity relates a forward exchange rate to a spot rate and two currency interest rates.
Interest Rate Parity Calculator
Results
Price currency interest rate
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Base currency interest rate
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Currency forward price
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Table of Contents
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What is Interest Rate Parity?
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How to Use This Calculator
- Enter or select Version, Number of days in the forward contract, Annualised price currency interest_rate, Annualised base currency interest rate, Spot price.
- Check the unit beside each measurement. For a percentage or rate, use the scale and time period stated in the form.
- Choose Calculate, then compare the output with the formula and example below. If you change a value or option, calculate again to update the result.
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Formula Used
Forward = spot × (1+quote-currency rate × t)/(1+base-currency rate × t)
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Variables Explained
| Input | What it means |
|---|---|
| Version | Use the measured or stated value for this item, with the unit or category shown beside the field. |
| Number of days in the forward contract | The number to test or transform; use the integer or real-number domain stated in the formula. |
| Annualised price currency interest_rate | The stated purchase or selling amount, in the same currency as the related costs. |
| Annualised base currency interest rate | The quoted rate for the time basis shown in the form; an annual rate is not a monthly rate. |
| Spot price | The stated purchase or selling amount, in the same currency as the related costs. |
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Worked Example
Spot 1.10, quote rate 5%, base rate 3% and t=1 give a forward rate near 1.12136.
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Why Use This Calculator?
Compare the result with the underlying statement, budget or proposed transaction. It is most useful when every amount uses the same reporting period and the same accounting definition.
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Common Mistakes
- Keep the quote direction and day-count convention consistent; reversing the currency pair reverses the relationship.
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Frequently Asked Questions
Should I use monthly or annual figures?
Use one consistent period for every amount and rate in the relationship. If a form specifies an annual rate or a monthly amount, follow that label rather than mixing time periods.
Does the result include fees and tax?
Only the costs and taxes represented by the inputs and formula are included. A real transaction can include other charges, so compare the estimate with the underlying agreement or statement.
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Sources & References
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