|
Click here to
put these Financial Calculators on your website!
|
|
Investment LoanThis calculator helps illustrate the effect of using a loan to purchase an investment or appreciable asset. Using debt as leverage to purchase investments can magnify your return. The downside is that you also increase your risk. For example, if your investment were to lose all of its value you would not only have lost your investment but you would still owe the balance on the loan.
Definitions
- Loan amount
- This is the total loan amount you are planning on taking out. This amount is also used as the initial value of the appreciable asset or investment that you are making.
- Loan term in years
- The number of years you wish to analyze for this loan. This can be any number from one to 30 years.
- Loan interest rate
- The annual interest rate you are charged for this loan. This calculator assumes that your payments are made monthly and that interest is compounded monthly.
- Investment rate of return
- This is the annually compounded rate of return you expect from your investments. The actual rate of return is largely dependant on the type of investments you select. For example, for the last thirty years the average annual rate of return for domestic equity stocks has been about 10%. Savings accounts at a bank pay as little as 2%. For the purposes of this calculator taxation is not factored into the results. If you pay taxes on the interest, dividends or capital gains from these investments you may wish to enter your after tax rate of return.
- Percent reinvested
- This is the percentage of the return generated by your investment that is reinvested. For example if your investment generates $1,000 per month and you reinvest 50% you will the value of your investment will increase by $500.
|
|
