Premium on forward rate
Premium on forward rate is a rate that occurs when the forward exchange rate differs from the spot rate. When the forward rate is above the spot rate, it is said to be at a premium.
Definitions
According to Financial Management Theory and Practice by Eugene F. Brigham and Michael C. Ehrhardt (13th edition),
- Premium on forward rate. Occurs when the forward exchange rate differs from the spot rate. When the forward rate is above the spot rate, it is said to be at a premium.
According to Fundamentals of Financial Management by Eugene F. Brigham and Joel F. Houston (15th edition),
- Premium on forward rate. The situation when the spot rate is greater than the forward rate.
Related concepts
- Financial management. A combination of enterprise efforts undertaken in order to procure and utilize monetary resources of the enterprise.
