3.a)Buyers are required to pay a minimum 10% down payment on a property purchase. Give reasons for requiring a borrower to make a down payment before receiving loan.

[6 marks]

b)"Interest rate that borrowers need to pay on their mortgages is probably the most important factor in their decision of how much and from whom to borrow". Based on this statement, explain the THREE (3) factors which determined the interest rate on the loan.

[6 marks]

c)If the demand for a country's exports falls at the same time that tariffs on imports are raised, determine whether the country's currency will appreciate or depreciate in the long run.

[2 marks]

d)Elaborate how the spikes in interest rates lead to an increase in adverse selection and moral hazard problems.