Suppose market interest rates are expected to rise. Would a potential borrower find a fixed rate mortgage or a variable rate mortgage more attractive? Why?
Potential borrower will find a fixed rate mortgage more attractive because this will protect him in the rising interest rates. He will have to pay the fixed rate even in the future the interest rate increases. Thus this will protect himself ...
The solution discusses if the potential borrower would find a fixed rate mortgage or variable rate mortgage more attractive.