V01-40

Official Solution:


Community spokesperson: After a recent surge of foreclosures, many homes in our community are vacant and falling into disrepair. Property values are already falling, and, if action is not taken quickly, will fall even further when panicked residents begin to leave. Clearly the only way to prevent a snowball effect is to make it easy to purchase these vacant homes by offering potential buyers special mortgages with a low interest rate for the first two years.
The plan to attract potential buyers by offering low-interest rate mortgages for the first two years rests on which of the following assumptions?

A. Vacant homes will always fall into disrepair.
B. Homes in the area remain vacant mostly because it is too difficult for potential buyers to afford them or to get mortgages.
C. Lenders do not have enough knowledge of interest rates that they can predict what will be considered a low rate for the next two years.
D. Some home owners may stay in the community, but their property values will decrease.
E. Vacant homes will cause residents to panic.


Situation: A community spokesperson proposes offering easy mortgages to home buyers to attract them to a community where foreclosures have left many houses vacant.

Reasoning:Which is the assumption underlying the spokesperson’s plan? The spokesperson is concerned that vacant homes will cause property values in the neighborhood to fall, and is looking for a permanent solution. The proposed solution aims to make it easier for potential buyers to purchase vacant homes, revealing the spokesperson’s assumption that the homes have not already been bought because people could not afford to take on mortgages at prevailing rates.

A. The spokesperson attributes falling property values to the fact that homes are both vacant and falling into disrepair; a permanent connection between the two is not assumed.

B. CORRECT. The plan to attract potential buyers through bargain mortgages rests on the assumption that vacant homes remain vacant mostly because no one can afford to buy them.

C. The success of the plan does not depend on lenders’ ability to predict what will be considered a low rate.

D. Though it is true that some home owners may choose to stay in the community, the spokesperson’s argument does not rest on this assumption.

E. According to the passage, falling property values, not vacant homes, may cause residents to panic.


Answer: B