How to Calculate the Margin Interest Costs Per Day

by C. Taylor

When you buy stock on margin, you are borrowing money from a broker to make your purchase. Like most loans, your broker will likely charge interest on the borrowed amount. The interest rate used is given as an annual interest rate, but you may not keep the loan a full year and will accrue interest everyday. To figure out how much you are being charged per day, you need to calculate the daily interest rate.

Contact your broker and ask what the annual interest rate is and how many days they use to constitute a full year. Many brokerages calculate daily interest with 360 days in a year, rather than the actual 365.

Divide the annual interest rate, in decimal format, by the number of days in a year. This calculates the daily interest rate. If your broker uses 360 days in a year with an annual interest rate of 2.5 percent, divide 0.025 by 360 to derive 0.00006944.

Multiply this figure by the margin loan amount. In the example, if you borrowed $8,000, then you would accrue $0.56 per day.

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