varotkorn wrote:
Dear
DavidTutorexamPAL AjiteshArun VeritasKarishma,
I think that
the conclusion is from the question stem, which states that a plan to increase interest rates can spur profitable growth. In my opinion, this is different from
This increase will be sufficient to compensate for the current rate of defaults.
The reason why I am confused is because
MGMAT's solution (P.167 in ed.6) says that:
"They're claiming that 12% will be enough to compensate for the current rate of people who don't pay...""The evidence shows only that the higher interest rate will be sufficient for today's default rate; that could change over time"The 2 sentences above from the solution seem to be a paradox. I am not sure which to believe.
Thank you in advance !
The "conclusion" is the conclusion of the argument. Sometimes, the conclusion may not be explicitly stated in the argument though you can easily figure out what it is. The question stem may word or reword the conclusion to make things easier for you. That is what it does here.
CEO: We have more than doubled our revenues but profits have steadily declined.
More customers have failed to pay their balances.
To compensate for these higher default rates, increase the interest rate from 9.5% to 12%.
This increase will be sufficient to compensate for the current rate of defaults.
Conclusion: This increase will allow us to increase our profits.
Which of the following statements, if true, would most seriously undermine a plan to increase interest rates in order to spur profitable growth?
The conclusion in the question stem relates to "increasing interest rates for better profit".
The obvious issue with this plan could be an increase in default rates. Then the increased interest rate may not be able to make up for the shortfall.
(E) An increase in the APR charged on credit card balances often results in higher rates of default.
Perfectly points out the problem with the plan.
Answer (E)