Buying on margin is when an investor invests with borrowed money, which amplifies both gains and losses.
Formulas:
| Initial Equity Investment |
| Initial Equity Percentage |
| Initial Equity Investment + Amount Borrowed |
| Initial Share Price |
Capital gain = Shares Purchased x (Ending Share Price - Initial Share Price)
Dividends = Shares Purchased x Cash Dividends During Hold Per
| Holding Period in months |
| 12 |
Net Income = Capital Gain + Dividends - Interest on Margin Loan
| Net Income |
| Initial Equity Investment |
| (Shares Purchased x Ending Share Price) - Amount Borrowed |
| Shares Purchased x Ending Share Price |
| Amount Borrowed |
| Shares Purchased - (Maintenance Margin x Shares Purchased) |
| Ending Share Price - Initial Share Price + Cash Dividends During Hold Per |
| Initial Share Price |