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18 Jun 2011, 21:06
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D
Be sure to select an answer first to save it in the Error Log before revealing the correct answer (OA)!
Difficulty:
55%
(hard)
Question Stats:
61% (01:55) correct
39%
(02:20)
wrong
based on 687
sessions
History
Date
Time
Result
Not Attempted Yet
In the past two years, the effects of the worldwide economic downturn have been felt in all corners of the economy. For example, data from the Crescent City furniture industry show that sales have decreased 12% compared to two years ago. Yet the banks who provide working capital to the furniture retailers report that, in the first year of the downturn, the proportion of credit they provided to the retailers that was repaid on time dropped sharply, while in the second year it returned to normal levels.
Question
Which one of the following, if true, most helps to explain the change in credit repayment reported?
A)The total dollar amount of the loans decreased slightly between the first year and the second.
B)New restrictions on the banking industry instituted since the economic downturn began have limited the number of loans banks can make to troubled borrowers.
C)The largest furniture chain in Crescent City slashed prices in the second year in order to stimulate sales.
D)Almost all of the most financially troubled furniture retailers went out of business at the end of the first year of the economic downturn.
E)Between the first and second years of the recession, wholesalers were forced to significantly raise the prices they charged to retailers.
Source: Grockit
Question
Which one of the following, if true, most helps to explain the change in credit repayment reported?
A)The total dollar amount of the loans decreased slightly between the first year and the second.
B)New restrictions on the banking industry instituted since the economic downturn began have limited the number of loans banks can make to troubled borrowers.
C)The largest furniture chain in Crescent City slashed prices in the second year in order to stimulate sales.
D)Almost all of the most financially troubled furniture retailers went out of business at the end of the first year of the economic downturn.
E)Between the first and second years of the recession, wholesalers were forced to significantly raise the prices they charged to retailers.
Source: Grockit
19 Jun 2011, 15:10
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my answer was C. Not sure how the OA is D. if retailers went out of business at the end of the 1st year, how did they repay in 2nd year...
19 Jun 2011, 15:28
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i had to choose between b and d. finally went for b because that was similar to the reason i had thought of before reading the answer choices.
from the question: Sales went down. Loan defaults went up the 1st year but was normal the 2nd year.
Possible reason: banks were more careful in lending money and lent to only clients who could pay back for sure.
while D might also be a possible reason, B sounds more sufficiently convincing to me. IMO, all financially troubled retailers need not go out of business for default rates to go down. It is sufficient that such retailer are not lent any money for default rates to be normal.
from the question: Sales went down. Loan defaults went up the 1st year but was normal the 2nd year.
Possible reason: banks were more careful in lending money and lent to only clients who could pay back for sure.
while D might also be a possible reason, B sounds more sufficiently convincing to me. IMO, all financially troubled retailers need not go out of business for default rates to go down. It is sufficient that such retailer are not lent any money for default rates to be normal.
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