Return Comparator
Analyze the risk-adjusted return of private loans vs traditional instruments using the CAPM model.
This calculator compares the risk-adjusted return of private loans against traditional instruments using the CAPM (Capital Asset Pricing Model).
It's ideal for investors who want to understand whether a private loan's return justifies the risk compared to CDs and Treasuries.
Enter the risk-free rate, beta, equity risk premium, and private lending-specific premiums.
For example, if the risk-free rate is 4.45% and CAPM suggests a fair return of 9.5%, a 10% loan offers a positive spread over the assumed risk.
CAPM Parameters
Rate = Rf + β(Rm - Rf) + Illiquidity Premium + Credit Spread
Resulting CAPM Rate
9.35%
Rate Construction (Waterfall)
Each CAPM model component adds up to build the required rate of return.
Return Comparison
| Instrument | Annual Return | Risk | Collateral | Liquidity |
|---|---|---|---|---|
| Bank CD 12M | 3.42% | Very low | FDIC insured | Low |
| High-Yield Savings | 3.25% | Very low | FDIC insured | High |
| Treasury 10Y | 4.45% | Very low | US Government | High |
| Private Loan | 9.35% | Medium | Real estate (1st lien) | Low |
| S&P 500 (10Y avg.) | 13.45% | High | None | High |
The sweet spot of private lending
Private loans sit at an optimal point: returns above low-risk instruments (CDs, Treasuries, HYSA), with controlled risk thanks to first-lien real estate collateral. For non-resident alien (NRA) investors, interest income from private loans may be exempt from U.S. federal taxes under applicable tax treaties — a significant advantage over other fixed-income instruments.
Your investment of $100,000 would generate 9.35% annual in 12 months.
Want to analyze a real opportunity?
Comparative Returns
CAPM Formula
Rate = Rf + β(Rm - Rf) + Illiquidity Premium + Credit Spread
4.45% + 0.4 × 6% + 1.5% + 1% = 9.35%
Data Sources
- Risk-Free Rate (Rf):U.S. Treasury 10-Year Constant Maturity Rate
- Equity Risk Premium:Prof. Aswath Damodaran, NYU Stern School of Business
- Bank CD 12M:FDIC Treasury Yield — 12 Month CD
- High-Yield Savings:Fed Funds Target Rate (upper bound) — HYSA proxy
- S&P 500 (10Y avg.):S&P 500 Index — 10-Year CAGR + dividends
Data updated as of 06/2026. Values presented are for reference and may vary. This tool does not constitute financial advice.