margin interest

Definition

An interest rate applied to a loan or margin extended by a broker. When an investor wishes to make a purchase that is in excess of the cash in hand, a brokerage firm will automatically provide access to additional capital. An interest rate will be applied to this extension of a loan, which compensates the brokerage firm for access to the capital.

Use margin interest in a sentence

When a bank provides additional capital to complete a transaction, they apply margin interest on the capital as additional compensation.

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Margin Department gross yield