Marginal Cost Of Funds

The marginal cost of funds (MCF) is the cost of raising additional funds by borrowing money. It is the cost of borrowing funds at a given interest rate, when the fund manager is considering the marginal cost of funds for the purpose of choosing whether to invest the funds in the traded assets.

The marginal cost of funds is calculated by taking the cost of borrowings on high-interest loans. For example, if a firm can borrow funds at a rate of 10%, the marginal cost of funds would be 10%.