Peer 2 Peer Lending?

theSpaniard said

On the Prosper site, they talk about how they build the default risk into the interest rates.

For example:

Say the highest rated borrowers (rated 'AA' on Prosper) default on their loans, on average, about 7% of the time. The interest rate they borrow at will be set at 15%, so that a lender can expect an 8% return on average.

Click to expand...

So, if I understand correctly....

You loan $100 out 100 times. That's $10,000 in loans. You get an 8% return on that. So, your $10,000 investment returns you $800.00. However, 7% of those loans default, which means that you lose $700 in defaults. Your net is $100, minus 15% capital gains taxes, which means that your $10,000 investment returns you $85 after taxes?

Or am I misreading what they are saying?