📈 Forward Rate Calculator
Find f(T1,T2) implied by spot rates R1 over T1 and R2 over T2.
Implied Forward Rate f(T1,T2)
5.0097%
How to Use This Calculator
Enter two spot zero‑coupon rates and their maturities. The calculator infers the constant forward rate between T1 and T2 that makes discounting consistent across the curve. This is a core fixed‑income identity: the compounded return of investing to T2 must equal investing to T1 and then rolling at the forward rate until T2. Forward rates help price forward‑starting loans, swaps, and the future cost of funding.
Formula
f = ((1+R2)^(T2) / (1+R1)^(T1))^(1/(T2-T1)) - 1
About Forward Rate Calculator
The forward rate is the breakeven return for lending or borrowing over a future interval implied by today’s yield curve. It allows you to translate spot yields into forward‑starting pricing without assuming any view on future policy moves. Market practitioners use forward rates to quote and hedge exposures across tenors, build swap curves, and price forward‑starting instruments. While forwards are not literal forecasts, they provide a coherent, arbitrage‑free way to connect different maturities on the curve and to compare funding alternatives across time.
Frequently Asked Questions
Does this assume annual compounding?
Yes, for simplicity. If your market quotes on a different basis (e.g., continuous or semi‑annual), convert the spot rates to an annual‑effective basis before using this tool or adapt the formula to your compounding convention.
Is the forward a prediction?
Not necessarily. It is the no‑arbitrage rate consistent with today’s yield curve. Actual future rates can differ due to risk premia and changing expectations.