How to Calculate an Investor's Percentage Return Based on the Amount Put Up as Margin
An investor's return on margin is a percentage that measures the net gain on an investment with respect to the investment's perceived risk. Calculate the ROM in two steps. The first step requires the calculation of the ROM itself, and the second step involves the calculation of the annualized ROM, which takes into account the investor's percentage return over the course of a few years.
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Instructions
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1
Divide the realized return on the investment by the initial amount put up as a margin at the beginning of the investment. This will give you the return on margin, in terms of a decimal. Multiply by 100 to put the ROM into percentage form, if you wish. So, if your realized return was $5, and you put up $50 as a margin, the ROM in decimal form would be 0.1 or 10 percent.
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2
Annualize the return on margin by adding one to the decimal form of ROM. This would give 1.1, using the same example. Call this result "A." Next, divide the number of months invested in the asset by 12, and then take the reciprocal. If you invested in the asset for three months, the result would be four. Name this result as "B."
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3
Raise "A" to the power of "B" and subtract by one. This would give a result of 0.4641, using the same example. Multiplying by 100 provides a result of 46.41 percent. This final figure represents the return on investment, annualized for three months.
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