After discussing the details of the market segment you are targeting with your Marketing and Risk Departments, your team learned that consumers would prefer access to longer loan terms. The Risk Department also mentioned that, historically, customers in this segment default on average at the following rates: Month 1 2 3 4 5 6 Default Rate 10% 5% 4% 3% 2% 1% That is, we expect 10% of loans to default before any payment takes place (at month 1), 5% of the loans that were active after one month to default during the second month, and so on. Your company also informed your team that they secured $10MM to provide 6-month loans to customers and determined that the typically desired loan amount is $1,000. In order to secure this amount, the company estimated that investors will require an annualized return of 18% to compensate them for the inherent risk of this opportunity. 

Analysis, assume that the segment is large enough, costumers are keen on using your product, and that this opportunity is just a one-time program.