Forward Premium is defined as the difference between the current spot rate and the forward rate.
Formula: [(Forward rate – Spot rate)/spot rate] x (360/number of days in the contract) x 100.
1. If forward rate > spot rate, there is a premium on that currency. In formula, a positive percentage value means a forward premium.
2. If forward rate < spot rate, there is a discount on that currency. In formula, a negative percentage value means a discount.