Interest Rate Parity Calculator

Convention used here: in a quote like EUR/USD, EUR is the base currency and is also the foreign currency in this example, while USD is the quoted currency and is the home currency. So EUR/USD = 1.0800 means 1 euro costs $1.0800.

Theme:

Inputs

Field	Value	Notes
Spot Rate, S		Example: EUR/USD = 1.0800.
Base Currency Annual Interest Rate (%)		Base = foreign currency. Example: in EUR/USD, the base currency is EUR, so use the euro interest rate here.
Quoted Currency Annual Interest Rate (%)		Quoted = home currency. Example: in EUR/USD, the quoted currency is USD, so use the U.S. interest rate here.
Days till Maturity		Use a 360-day year. Example: 90 days = 1/4 of a year.
Forward Rate, F	--	Forward rate implied by IRP.
Forward Premium / Discount	--	Computed as F/S − 1.

Quick convention reminder: for EUR/USD, EUR is base/foreign and USD is quoted/home. The IRP formula below uses the quoted currency rate in the numerator and the base currency rate in the denominator.

Formula and notes

F = S × ((1 + i_q) / (1 + i_b))

For partial periods: F = S × (1 + i_q × days/360) / (1 + i_b × days/360)

Forward Premium = F/S − 1 = (F − S)/S

Meaning of the symbols:
i_b = interest rate in the base currency (example: EUR in EUR/USD)
i_q = interest rate in the quoted currency (example: USD in EUR/USD)
S = current spot exchange rate
F = forward exchange rate

Example

If EUR/USD = 1.0800, euro rate = 2.5%, U.S. rate = 4.5%, and days = 90, then the forward rate should be slightly above spot because the quoted/home currency rate is higher than the base/foreign currency rate.