I find the intuition relatively simple for the Forward currency equation
(1+DomesticIntRate**)** = SPOT foreignperdomestic (1 + ForeignIntRate) ( 1/ F ORWORD foriegnperdomestic)
Under Libor the Interest rates are multiplied by Actual/360 … Okay got it.
I can manipulate the equation so that
FORWARD foriegndomestic = SPOT foreigndomestic * ( 1 + ForeignIntRate) / (1+ DomesticIntRate)
How do you manipulate the equation to be the forward - Spot differential … ??
i.e. to this ------>
Forward foreignDomestic - SPOT fforeignDmomestic = SPOT foreignDomestic * (i foreign- i domest )* (1/1+i domest )
I understand that this is an algebra question… I could just memorize each equation but I prefer to remember one!
so if anyone can show me the steps I would greatly appreciate it!
~Josh