Leveraged Return Calculator

Updated April 17, 2026 · Investing · Educational use only ·

Return on equity when an investment is partly borrowed, net of borrowing cost.

Calculate the return on a leveraged investment after borrowing cost. Enter equity, leverage ratio, asset return and borrow rate.

What this tool does

Leverage amplifies both gains and losses. Enter your equity, the leverage multiple (1x means no leverage; 2x means you've borrowed one pound for every pound of equity), the asset's expected return, and the rate you pay on borrowed funds. The tool returns the net return on equity and the cash gain or loss.

Enter Values

Your Equity (Cash Invested)(£)ⓘ

Leverage Multipleⓘ

Asset Returnⓘ

Borrow Rateⓘ

Formula Used

R O E = L \times r_{a} - (L - 1) \times r_{b}

L

Leverage multiple

r_{a}

Asset return rate

r_{b}

Borrow rate

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Disclaimer

Results are estimates for educational purposes only. They do not constitute financial advice. Consult a qualified professional before making financial decisions.

10,000 of equity at 2x leverage means a 20,000 position. If the asset returns 8% (1,600) and you borrowed at 4% (400), you net 1,200 — a 12% return on equity. The same setup at -4% asset return loses 800 plus 400 in borrowing costs — a 12% hit on equity. Leverage works both ways.

How to use it

Enter your own cash (equity), the leverage multiple, the asset's return rate, and the borrow rate on the leverage portion.

What the result means

The primary figure is the net return on equity as a percentage. The secondary rows show the gross asset return, borrow cost, and cash gain or loss on the equity invested.

Why leverage is risky

A 2x-levered position is wiped out at a 50% asset drop (ignoring margin calls). A 5x position is wiped out at a 20% drop. This tool assumes you can hold through volatility — in practice, margin calls can force a sale at the worst moment. Treat the positive return calculation as a best-case.

Example Scenario

Net return on equity at this leverage and return assumption is shown above.

Inputs

Your Equity (Cash Invested):10,000 £

Leverage Multiple:2

Asset Return:8

Borrow Rate:4

Expected Result12.00%

This example uses typical values for illustration. Adjust the inputs above to match a specific situation and see how the result changes.

Sources & Methodology

Methodology

Return on equity equals leverage times the asset return, minus the borrowed share (leverage minus one) times the borrow rate. Assumes interest accrues over the full return period and ignores margin maintenance rules. For real positions, add a buffer for call risk.

References

Investopedia: leverage and its effect on returns

Frequently Asked Questions

What leverage is 'safe'?

No level is objectively safe — it depends on the asset's volatility, your time horizon, and the terms of the loan. Equity margin accounts are typically 1.5-2x; professional CFD and FX traders often use much more and take proportionally larger losses.

What if the asset falls?

Plug in a negative asset return. The tool multiplies the loss by the leverage ratio and still subtracts the borrow cost — leverage punishes losses symmetrically.

Does this include margin call risk?

No. Real broker margin rules force asset sales when equity falls below a maintenance threshold, often locking in losses at the worst time. A leveraged position that would recover on paper can still be closed out.

Is this property leverage or stock leverage?

Same math. Property investors call it gearing; traders call it leverage. The calculation of net return on equity is identical.

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