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Covered Interest Parity & Uncovered Rate Scenario

Model a covered forward rate or a linear uncovered-rate scenario from spot price and annualized rates using the captured 360-day simple-interest convention.

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Calculator inputs

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How to use this calculator

  1. Enter the known values in the units shown. Results update as you type.
  2. Where results are editable, change one to solve backwards. Lock a value to hold it fixed.
  3. Use the worked example to check the method. Reset restores the starting fields.

Use the result with context

Results are estimates for planning and education. Confirm rates, taxes, fees, and legal requirements with the relevant institution or a qualified professional before making a financial decision.

Formula and method

At spot 1.20 quote units per base unit, annual quote and base rates of 5% and 2%, and 360 days, covered parity gives about 1.235294. The retained linear uncovered approximation gives 1.236.

Period rate = annual rate × days/360; covered F = S(1 + quote rate)/(1 + base rate)

Worked example

Enter these known values and leave the other values blank.

Number of days in the forward contract
360 days
Annual quote-currency rate
5 %
Annual base-currency rate
2 %
Spot quote units per one base unit
1.2 USD
Quote-currency rate over the term
5 %
Base-currency rate over the term
2 %
Covered forward quote per base unit
1.2353 USD

Assumptions and limitations

  • Quote the spot value as units of the price or quote currency per one base-currency unit. Use that same orientation for both interest rates and the output.
  • Annualized rates are converted to simple period rates using days/360. The calculator does not infer a currency-pair convention or compound the annual rates.
  • Both period gross-growth factors must be positive. Negative interest rates are supported while their period rates remain above −100%. Spot and returned exchange values must be positive.
  • Covered parity is an idealized relationship without transaction costs, funding spreads or cross-currency basis. It is not a live executable market quote.
  • The uncovered mode preserves S × (1 + quote period rate − base period rate), a linear approximation. It is a scenario under its assumptions, not a reliable prediction of a future spot price.

Common questions

Why are the two displayed methods slightly different?

The covered method divides two gross-growth factors. The retained uncovered mode uses their rate difference in a linear expression, so it does not have exactly the same finite-rate arithmetic.

References

Bookify requires positive exchange values and positive period growth factors, while permitting negative interest rates above the period lower bound.

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