1. What is Stock Margin Interest?

Stock margin interest is the cost of borrowing money from your broker to purchase securities. When you buy stocks on margin, you're essentially taking a loan from your brokerage, and they charge interest on this loan.

2. How Does the Calculator Work?

The calculator uses the margin interest formula:

Where:

• \( Margin\ Loan \) — Amount borrowed from broker (USD)
• \( Broker\ Rate \) — Annual interest rate charged by broker (decimal)
• \( Period \) — Number of days the loan is outstanding

Explanation: The formula calculates the daily interest (annual rate divided by 360 days) multiplied by the loan amount and number of days.

3. Importance of Margin Interest Calculation

Details: Understanding margin interest costs helps investors evaluate the true cost of leveraged positions and make informed decisions about margin trading strategies.

4. Using the Calculator

Tips: Enter the margin loan amount in USD, broker's annual interest rate as a decimal (e.g., 0.08 for 8%), and the holding period in days. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: Why divide by 360 instead of 365?
A: Many financial institutions use a 360-day year for interest calculations to simplify daily rate computation.

Q2: How often is margin interest charged?
A: Typically calculated daily but charged monthly to your account.

Q3: Can margin interest rates change?
A: Yes, broker rates often fluctuate based on benchmark rates like the Fed Funds Rate.

Q4: Is margin interest tax deductible?
A: In many jurisdictions, margin interest may be tax deductible for investment purposes (consult a tax professional).

Q5: What's a typical broker margin rate?
A: Rates vary but often range from 5% to 12% annually depending on the broker and loan amount.