Alpha and Beta Calculator
Free alpha and beta calculator. Measure your portfolio's market sensitivity (beta) and excess risk-adjusted return (alpha) against a benchmark index.
Margin Interest Calculator
Calculate the true cost of borrowing on margin. Compare broker rates, see daily/monthly costs, effective rates, and whether leverage boosts or erodes your returns.
Total position (equity + margin loan)
Annual return to calculate net P/L
Total Interest Cost⧉
$4,163.88
Over 365 days
Cost per Day⧉
$11.41
$347.26 per month
Effective Annual Rate⧉
8.33%
Nominal: 8%, daily compounding
Break-Even Return⧉
4.16%
Stock must return this just to cover interest
Net Gain (after interest)⧉
$7,836.12
Gross gain: $12,000.00
Leverage Boost⧉
+3.7pp
ROE: 15.7% vs unleveraged 12.0%
Return Breakdown
Gross Gain
$12,000.00
Interest Cost
$4,163.88
Net Gain
$7,836.12
Interest by Rate
| Rate | Annual Interest | Daily Cost | Monthly Cost |
|---|---|---|---|
| 4% | $2,000.00 | $5.48 | $166.79 |
| 6% | $3,000.00 | $8.22 | $250.19 |
| 8% | $4,000.00 | $10.96 | $333.59 |
| 10% | $5,000.00 | $13.70 | $416.99 |
| 12% | $6,000.00 | $16.44 | $500.38 |
| 14% | $7,000.00 | $19.18 | $583.78 |
Monthly Accrual Schedule
| Month | Interest | Cumulative | Balance (if compounding) |
|---|---|---|---|
| 1 | $333.33 | $333.33 | $50,333.33 |
| 2 | $335.56 | $668.89 | $50,668.89 |
| 3 | $337.79 | $1,006.68 | $51,006.68 |
| 4 | $340.04 | $1,346.73 | $51,346.73 |
| 5 | $342.31 | $1,689.04 | $51,689.04 |
| 6 | $344.59 | $2,033.63 | $52,033.63 |
| 7 | $346.89 | $2,380.52 | $52,380.52 |
| 8 | $349.20 | $2,729.73 | $52,729.73 |
| 9 | $351.53 | $3,081.26 | $53,081.26 |
| 10 | $353.88 | $3,435.13 | $53,435.13 |
| 11 | $356.23 | $3,791.37 | $53,791.37 |
| 12 | $358.61 | $4,149.98 | $54,149.98 |
Planning notes, formulas, and examples
About the Margin Interest Calculator
Margin interest is the ongoing cost of borrowing money from your broker to buy securities. Unlike a fixed loan, margin interest typically accrues daily on the outstanding balance and can significantly erode your returns — especially for positions held over months or years.
Most brokers charge between 5% and 13% annually, compounded daily. On a $50,000 margin loan at 8%, you're paying roughly $11 per day or $333 per month. Your investments must earn more than the interest rate just to break even, and any shortfall comes directly out of your pocket.
This calculator shows your exact interest cost for any holding period, the effective annual rate after compounding, the break-even stock return, and the net impact of leverage on your returns. The rate comparison table lets you evaluate different broker rates, and the monthly accrual schedule shows how the cost compounds over time.
When This Page Helps
Margin interest is easy to underestimate because the position gain is visible while the borrowing cost accrues quietly in the background. This calculator makes the financing drag explicit so you can see when leverage adds value and when it simply raises risk.
How to Use the Inputs
- Enter your current margin loan balance.
- Set the annual interest rate from your broker.
- Choose the compounding method (most brokers use daily).
- Enter your total position value and expected stock return.
- Review the interest cost and break-even return.
- Compare rates across brokers using the rate comparison table.
Formula used
Daily Compound Interest = Balance × ((1 + Rate/365)^Days − 1)
Simple Interest = Balance × Rate × (Days/365)
Effective Rate = (1 + Rate/365)^365 − 1
Break-Even Return = Interest Cost / Total Position × 100
Leverage Boost = ROE_leveraged − ROE_unleveragedExample Calculation
Result: Interest cost = ~$4,160 (daily compounding)
A $50,000 margin loan at 8% with daily compounding accrues approximately $4,160 over one year. The effective annual rate is 8.33%. You need your investments to return at least 4.2% on the total position just to cover the interest.
Tips & Best Practices
- Compare effective rates, not nominal rates — daily compounding adds 0.3% to an 8% nominal rate.
- Pay margin interest monthly to avoid it compounding on your balance.
- Short-term trades incur less total interest — consider your holding period.
- If your stock return barely covers the interest rate, the leverage risk isn't worth it.
- Some brokers offer promotional rates for new margin accounts — take advantage.
Financing Cost Sets The Hurdle
A margin loan raises the minimum return your portfolio needs to earn before leverage becomes worthwhile. If the expected return is only slightly above the borrowing cost, the upside is thin while the downside risk stays large.
Holding Period Changes Everything
A margin trade that looks reasonable over a few days can become unattractive over months once the interest drag compounds. Use the holding-period inputs to test whether the trade still works if you are early on the thesis but late on the timing.
Broker Rate Differences Matter
Small differences in quoted margin rates can produce large changes in annual cost on a sizeable balance. Compare effective annual cost, not just the advertised nominal rate, when choosing where to borrow.
Sources & Methodology
Last updated:
Methodology
This calculator estimates financing drag on a margin debit balance under three user-selected accrual methods: simple interest, daily compounding, or monthly compounding. It computes total interest cost over the chosen holding period, effective annual rate under the selected compounding assumption, break-even portfolio return needed to offset the borrowing cost, and a simplified leveraged-versus-unleveraged return comparison using the expected annual asset return you enter.
The result is a planning worksheet rather than a broker statement recreation. Real brokers may use different day-count conventions, tiered rates, changing debit balances, or monthly interest debits, and the tax input is not modeled inside the return comparison.
Sources
- Understanding Margin Accounts (Investor.gov) — SEC investor bulletin covering debit balances, financing cost, and margin-account risks.
- Margin Accounts (Investor.gov) — Glossary definition of a margin account and the mechanics of borrowing from a broker.
- Publication 550: Investment Income and Expenses (Internal Revenue Service) — IRS guidance on investment interest expense, including margin-interest treatment.
Frequently Asked Questions
Most charge daily based on the settled margin debit balance. The formula is: Daily Charge = Balance × (Annual Rate / 360 or 365), accrued daily and debited monthly.
Yes, margin interest is generally deductible as investment interest expense, but only against net investment income. Consult a tax advisor.
Rates vary by broker competitiveness and loan size. Interactive Brokers charges 5-6%, while full-service brokers may charge 10-13%. Larger balances often get lower rates.
When your expected return is close to or below the margin interest rate. If you're borrowing at 8% and expect 9% returns, the leverage boost is minimal and the risk is high.
If you don't pay the interest monthly, it adds to your balance and compounds. Most brokers debit interest monthly from your cash balance.
Use a lower-rate broker, qualify for size-based pricing tiers if available, reduce the holding period, or lower the borrowed balance. The cheapest margin loan is still expensive if the position barely clears the financing hurdle.
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