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Finance

Covered Interest Rate Parity calculator

No-arbitrage forward exchange rate implied by the interest rate gap between two currencies.

What this calculator does

Covered Interest Rate Parity works out no-arbitrage forward exchange rate implied by the interest rate gap between two currencies. Enter your own figures above and the answer updates as you type: nothing is fixed in the code, so the result reflects exactly the numbers you supply.

The formula this calculator evaluates is printed under the tool and explained below, so you can check the working by hand or reuse it in a spreadsheet.

The formula

FormulaForward rate = Spot rate × (1 + price currency rate) / (1 + base currency rate)

The inputs explained

FieldWhat to enter
Spot exchange rateA number. Starts at 1.1.
Price currency interest rate (annual, %) (%)A number, measured in %. Starts at 5.
Base currency interest rate (annual, %) (%)A number, measured in %. Starts at 2.
Days until settlementA number. Starts at 180.

Worked examples

Every figure in the tables below is produced by this page’s own calculator at build time, so the numbers and the tool always agree. Select any row to load that scenario.

How the answer changes with spot exchange rate

Every other input is held at the calculator’s starting values while spot exchange rate varies. Select any row to load that scenario into the calculator.

How the answer changes with spot exchange rate
Spot exchange rateForward rateForward pointsAnnualised interest rate gap
0.550.5582+0.00823.00%
0.830.8423+0.01233.00%
1.11.116+0.01633.00%
1.651.675+0.02453.00%
2.22.233+0.03273.00%
3.33.349+0.04903.00%