Its not as simple as that, the chance to default is per year, and each individual loan has an average length of time before it defaults, where you would receive none or some of the interest payments until that point.
Also when you model what would happen if default rates spiked, the value point shifts from the DEF end to the ABC end.
I have done extensive modelling on this.. I did find that the sweet point is in the E for the current market conditions, should the economy tank and default rates spike, then you would want more ABC's.
I do think most A's suck the interest rate is too low and they are often paid back early. Likewise a lot of the F's - 12% expected annual default rate? no thanks Jeff.
Fwiw this is my distribution, I have 800+ loans, average loan value probably $90 (ie 4 notes most of the time, sometimes 2 or 3)
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