5.16What are interest charges on margin?
1What is it?
Interest is the cost of the broker’s loan, usually charged per day on the funded amount.
2Why does it exist?
It reduces your profit and keeps growing the longer you hold.
3Calculation
Interest = Loan × Annual rate × Days ÷ 365
- Loan ₹75,000 at 15% for 60 days
- ₹75,000 × 0.15 × 60 ÷ 365 ≈ ₹1,849
You need a gain of at least ~₹1,849 just to cover interest.
4Quick revision
- Interest charged daily.
- Long holding means high interest cost.
5Knowledge check
Q1. ₹50,000 loan at 18% for 30 days. Interest?Show answer
≈ ₹740.
Q2. Does interest stop while the stock is falling?Show answer
No.
Q3. What happens to profit if interest is high?Show answer
It shrinks.