Hello,
The problem: Lets says you are investing $100,000 in a company that deals in loans. You are allowed to invest in many deals(loans) but total investment is 100k. The rate of return on an investment is lets say 1.45 the principal. The length of the deal(loan) and also the total time in which you would get the 1.45 rate back on your investment is 70 business days. The default rate of all loans in the company is lets say %7, which means if I invested in 100 deals of $1,000 on each deal, %7 or 7 of those deals would default and I would get nothing back.
If I invest $1,000 in one deal and it completely pays back in the 70 day period, my total return is $1,450 and so I have earned $450 in 70 days.
The question: In a 1 year time span... What is the max you would put into each deal to manage your risk, maximize your investment while taking into consideration the default rate(%7), and length of total return on investment (70 days)?
If I invest $2,000 per deal I can go in on 50 deals.
If I invest $4,000 per deal I can go in on 25 deals and so on....
Any help is greatly appreciated.
The problem: Lets says you are investing $100,000 in a company that deals in loans. You are allowed to invest in many deals(loans) but total investment is 100k. The rate of return on an investment is lets say 1.45 the principal. The length of the deal(loan) and also the total time in which you would get the 1.45 rate back on your investment is 70 business days. The default rate of all loans in the company is lets say %7, which means if I invested in 100 deals of $1,000 on each deal, %7 or 7 of those deals would default and I would get nothing back.
If I invest $1,000 in one deal and it completely pays back in the 70 day period, my total return is $1,450 and so I have earned $450 in 70 days.
The question: In a 1 year time span... What is the max you would put into each deal to manage your risk, maximize your investment while taking into consideration the default rate(%7), and length of total return on investment (70 days)?
If I invest $2,000 per deal I can go in on 50 deals.
If I invest $4,000 per deal I can go in on 25 deals and so on....
Any help is greatly appreciated.