How should the credit rating impact the return on my investment?

Generally speaking, the greater the risk of an investment, the greater the return an investor must demand.

Daskapital advises investors to set a minimum required return based on the risk rating to which you should add a rate of return that would benefit if you decided to invest risk-free.

To assist investors, Daskapital defines a Minimum Indicative Interest Rate (Tmin), calculated by the formula:

where:

1. the risk-free_rate represents the interest rate on a risk-free investment and for this purpose the yield on German treasury bonds due in 2 years recorded on the last business day of the previous quarter is used. To this end, the yields of these treasury notes are consulted on the Deutsche Bundesbank website.

2. the risk rate represents an estimate of losses on the crowdfunding project. For this calculation, the probability of default is assumed per score calculated by Iberinform and assuming losses of 100% in case of default. Current estimates of the probability of default by rating score are represented in the following table:

Calculation example:

• For a credit rating 5 (intermediate) to be effective in August 2024:

• Risk-free_rate = 2.81%

• Risk_rate = 1.5%

• So, the Minimum_Indicative_rate (Tmin) = 4.31%

If you need further clarification, please get in touch with us at support@daskapital.eu.