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Which of the following best completes the passage below? As

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Which of the following best completes the passage below? As [#permalink] New post 25 Jul 2008, 04:57
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A
B
C
D
E

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Which of the following best completes the passage below?
As long as savings deposits are insured by the government, depositors will have no incentive to evaluate the financial strength of a savings bank. Yield alone will influence their choice of bank. To attract deposits, banks will be forced to offer the highest possible interest rates. And since paying higher rates inevitably strains the financial strength of a bank, ______

(A) the government will be forced o impose limitations on interest rates
(B) deposit insurance will ultimately lead to the financial weakening of many banks
(C) savers will be forced to choose between deposit insurance and higher interest rates
(D) deposits will tend to go to the banks with the greatest financial strength
(E) bank profits will tend to rise to ever-higher levels

I am afraid if such questions appear in my real GMAT i will never be able to achive my target :roll:
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Re: CR: Banks [#permalink] New post 25 Jul 2008, 05:12
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sjgmat wrote:
Which of the following best completes the passage below?
As long as savings deposits are insured by the government, depositors will have no incentive to evaluate the financial strength of a savings bank. Yield alone will influence their choice of bank. To attract deposits, banks will be forced to offer the highest possible interest rates. And since paying higher rates inevitably strains the financial strength of a bank, ______

(A) the government will be forced o impose limitations on interest rates
(B) deposit insurance will ultimately lead to the financial weakening of many banks
(C) savers will be forced to choose between deposit insurance and higher interest rates
(D) deposits will tend to go to the banks with the greatest financial strength
(E) bank profits will tend to rise to ever-higher levels

I am afraid if such questions appear in my real GMAT i will never be able to achive my target :roll:


Premise: Government insurance protects bank customers from banks' financial weakness, allowing customers to choose banks only based on interest rate.
Premise/Conclusion: Banks compete solely for customers based on interest rate, so banks are forced to raise interest rates.
Premise: As interest rates rise, the financial soundness of a bank falls.

Conclusion: (B) Deposit insurance will ultimately lead to the financial weakening of many banks

A: Stimulus doesn't mention any limitations on the governments' part or any desire to insure that banks are financially strong
C: Stimulus doesn't mention anything about deposit insurance for bank customers being available
D: Stimulus says the opposite -- that financial strength is not a criterion for customers choosing a savings bank
E: Stimulus says rising interest rates will weaken the financial stability of banks, not strengthen
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Re: CR: Banks [#permalink] New post 25 Jul 2008, 05:13
I think, B is the correct answer.
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Re: CR: Banks [#permalink] New post 25 Jul 2008, 05:23
yes OA is B

I was unable to understand why B is ans.
Thanks for your explanation.It is clear now :)
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Re: CR: Banks [#permalink] New post 25 Jul 2008, 20:28
clearly B
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Re: CR: Banks [#permalink] New post 25 Jul 2008, 20:41
sjgmat wrote:
Which of the following best completes the passage below?
As long as savings deposits are insured by the government, depositors will have no incentive to evaluate the financial strength of a savings bank. Yield alone will influence their choice of bank. To attract deposits, banks will be forced to offer the highest possible interest rates. And since paying higher rates inevitably strains the financial strength of a bank, ______

(A) the government will be forced o impose limitations on interest rates
(B) deposit insurance will ultimately lead to the financial weakening of many banks -> IMO B
(C) savers will be forced to choose between deposit insurance and higher interest rates
(D) deposits will tend to go to the banks with the greatest financial strength
(E) bank profits will tend to rise to ever-higher levels

I am afraid if such questions appear in my real GMAT i will never be able to achive my target :roll:


Good Question
Premise : As long as savings deposits are insured by the government, depositors will have no incentive to evaluate the financial strength of a savings bank . Yield alone will influence their choice of bank. To attract deposits, banks will be forced to offer the highest possible interest rates
this shows banks are under strain and are forced

evidence : And since paying higher rates inevitably strains the financial strength of a bank

after reading the argument we can say BANKS are under STRAIN due to high interset rates due to deposit insurance

now conclution ?
Only choiuce favouring this reasoning is B .All others are vague and far away
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Re: CR: Banks [#permalink] New post 26 Jul 2008, 00:29
B looks like the best option.
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Re: CR: Banks [#permalink] New post 05 Jul 2011, 17:38
zoinnk wrote:
sjgmat wrote:
Which of the following best completes the passage below?
As long as savings deposits are insured by the government, depositors will have no incentive to evaluate the financial strength of a savings bank. Yield alone will influence their choice of bank. To attract deposits, banks will be forced to offer the highest possible interest rates. And since paying higher rates inevitably strains the financial strength of a bank, ______

(A) the government will be forced o impose limitations on interest rates
(B) deposit insurance will ultimately lead to the financial weakening of many banks
(C) savers will be forced to choose between deposit insurance and higher interest rates
(D) deposits will tend to go to the banks with the greatest financial strength
(E) bank profits will tend to rise to ever-higher levels

I am afraid if such questions appear in my real GMAT i will never be able to achive my target :roll:


Premise: Government insurance protects bank customers from banks' financial weakness, allowing customers to choose banks only based on interest rate.
Premise/Conclusion: Banks compete solely for customers based on interest rate, so banks are forced to raise interest rates.
Premise: As interest rates rise, the financial soundness of a bank falls.

Conclusion: (B) Deposit insurance will ultimately lead to the financial weakening of many banks

A: Stimulus doesn't mention any limitations on the governments' part or any desire to insure that banks are financially strong
C: Stimulus doesn't mention anything about deposit insurance for bank customers being available
D: Stimulus says the opposite -- that financial strength is not a criterion for customers choosing a savings bank
E: Stimulus says rising interest rates will weaken the financial stability of banks, not strengthen


Doesn't this part mention deposit insurance:
As long as savings deposits are insured by the government
Re: CR: Banks   [#permalink] 05 Jul 2011, 17:38
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