where time length of the forward contract in years
implied rate examplesif the spot price for a barrel of oil is 68 and a one year futures contract for a barrel of oil is 71 the implied interest rate is implied rate 71 68 1 1 1 4 41 divide the futures price of 71 by the spot price of 68 since this is a one year contract the ratio is simply raised to the power of 1 1 time subtract 1 from the ratio and find the implied interest rate of 4 41 if a stock is currently trading at 30 and there is a two year forward contract trading at 39 the implied interest rate is implied rate 39 30 1 2 1 14 02 divide the forward price of 39 by the spot price of 30 since this is a two year futures contract raise the ratio to the power of 1 2 subtract 1 from the answer to find the implied interest rate is 14 02 if the spot rate for the euro is 1 2291 and the one year futures price for the euro is 1 2655 the implied interest rate is implied rate 1 2655 1 2291 1 1 1 2 96 calculate the ratio of the forward price over the spot price by dividing 1 2655 by 1 2291 since this is a one year forward contract the ratio is simply raised to the power of 1 subtracting 1 from the ratio of the forward price over the spot price results in an implied interest rate of 2 96 