QUESTION 4 Why do prudent lenders require a down-payment with a mortgage? They want the buyer to have skin-in-the-game by taking a first loss position of buyers make down payments, it provides funding to help make more loans Interest payments will be lower with a higher down payment Down payments encourage savings thus enabling more Americans the ability to buy a home QUESTION 5 Why is equity the most expensive source of capital? Equity requires all profits over the floor to be paid out in dividends O Lenders participate in the upside whereas equity investment is asymmetrical Equity is the first loss in the capital structure and thus faces the highest risk of all classes of capital Equity holders are required to vote their shares and must be compensate for that extra effort IPO's must be registered with the SEC thus increasing costs making equity more expensive than debt