Finance

Forward Rate Calculator

Calculate the implied forward rate between two periods using spot rates from the yield curve.

Spot Rate (Short Term) (%)

e.g., 1-year Treasury yield

Short Term Period (years)

Spot Rate (Long Term) (%)

e.g., 2-year Treasury yield

Long Term Period (years)

Formula:
(1 + r₂)^t₂ = (1 + r₁)^t₁ × (1 + f)^(t₂−t₁)
f = [(1+r₂)^t₂ / (1+r₁)^t₁]^(1/(t₂−t₁)) − 1
This is the rate the market expects for the period between t₁ and t₂

What is a Forward Rate?

The forward rate is the implied future interest rate derived from the current yield curve. If the 1-year rate is 4% and the 2-year rate is 4.5%, the market implies a 1-year rate starting in 1 year (the "1y1y forward") of about 5%.