Leveraged Return Calculator
Enter your capital, the loan, the interest rate and the asset return.
Return on your equity
β
Enter values above
Net gain
β
Gross gain
β
Interest cost
β
Leverage ratio
β
Return if asset fell 10%
β
Worked example
With the default inputs shown below, this calculator returns the following results:
| Input | Value |
|---|---|
| Your own capital ($) | 20000 |
| Borrowed amount ($) | 30000 |
| Loan interest rate (%) | 6 |
| Asset return (%) | 10 |
| Holding period (years) | 1 |
| Fees on assets (%) | 0.2 |
| Result | Value |
|---|---|
| Return on your equity | 15.50% |
| Net gain | $3,100.00 |
| Gross gain | $5,000.00 |
| Interest cost | $1,800.00 |
| Leverage ratio | 2.5x |
| Return if asset fell 10% | -$6,900.00 |
Values shown are produced by this page in your browser; change any input to update them.
How to use the Leveraged Return Calculator
- Your own capital ($) β default 20000
- Borrowed amount ($) β default 30000
- Loan interest rate (%) β default 6
- Asset return (%) β default 10
- Holding period (years) β default 1
- Fees on assets (%) β default 0.2
- Press Calculate to update the results instantly.
Frequently asked questions
Borrowing increases the asset base without increasing your capital, so gains are measured against a smaller number. The same mechanism magnifies losses β see the downside figure.
When the after-tax asset return comfortably exceeds the borrowing cost and you can service the loan through a downturn. The margin needs to be wide, not marginal.
Margin calls and forced selling. If the asset falls enough, the lender can demand repayment at the worst possible moment, converting a paper loss into a realised one.