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# The government provides insurance for individuals

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Intern
Joined: 16 Sep 2014
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The government provides insurance for individuals [#permalink]

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17 Sep 2014, 04:03
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Difficulty:

35% (medium)

Question Stats:

69% (01:32) correct 31% (01:55) wrong based on 482 sessions

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The government provides insurance for individuals' bank deposits, but requires the banks to pay the premiums for the insurance. Since it is depositors who primarily benefit from the security this insurance provides, the government should take steps to ensure that depositors who want this security bear the cost of it and thus should make depositors pay the premiums for insuring their own accounts.

Which of the following is assumed by the argument?

(A) Banks are not insured by the government against default on the loans the banks make.

(B) Private insurance companies do not have the resources to provide banks or individual with deposit insurance.

(C) Banks do not always cover the cost of the deposit-insurance premiums by paying depositors lower interest rates on insured deposits than the banks would on uninsured deposits.

(D) The government limits the insurance protection it provides by insuring accounts up to a certain legally defined amount only.

(E) The government does not allow banks to offer some kinds of accounts in which deposits are not insured.

Source: LSAT

[Reveal] Spoiler: OA

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Last edited by broall on 20 Sep 2017, 02:39, edited 1 time in total.
Reformatted question
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Joined: 12 Mar 2013
Posts: 278
Re: The government provides insurance for individuals [#permalink]

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10 May 2017, 09:35
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The government provides insurance for individuals’ bank deposits, but requires the banks to pay the premiums for this insurance. Since it is depositors who primarily benefit from the security this insurance provides, the government should take steps to ensure that depositors who want this security bear the cost of it and thus should make depositors pay the premiums for insuring their own accounts.

Which one of the following is assumed by the argument?

(A) Banks are not insured by the government against default on the loans the banks make.
(B) Private insurance companies do not have the resources to provide banks or individuals with deposit insurance.
(C) Banks do not always cover the cost of the deposit-insurance premiums by paying depositors lower interest rates on insured deposits than the banks would on uninsured deposits.
(D) The government limits the insurance protection it provides by insuring accounts up to a certain legally defined amount only.
(E) The government does not allow banks to offer some kinds of accounts in which deposits are not insured
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Last edited by broall on 20 Sep 2017, 02:38, edited 3 times in total.
Merged post. Please search before posting
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Re: The government provides insurance for individuals [#permalink]

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10 May 2017, 10:50
nahid78 wrote:
The government provides insurance for individuals’ bank deposits, but requires the banks to pay the premiums for this insurance. Since it is depositors who primarily benefit from the security this insurance provides, the government should take steps to ensure that depositors who want this security bear the cost of it and thus should make depositors pay the premiums for insuring their own accounts.

Which one of the following is assumed by the argument?

(A) Banks are not insured by the government against default on the loans the banks make.
(B) Private insurance companies do not have the resources to provide banks or individuals with deposit insurance.
(C) Banks do not always cover the cost of the deposit-insurance premiums by paying depositors lower interest rates on insured deposits than the banks would on uninsured deposits.
(D) The government limits the insurance protection it provides by insuring accounts up to a certain legally defined amount only.
(E) The government does not allow banks to offer some kinds of accounts in which deposits are not insured

Here the conclusion is "thus should make depositors pay the premiums for insuring their own accounts". The author is assuming that banks are paying the premium and banks are not charging the customers for it.

Option A - Extraneous information, out of scope
Option B - Extraneous information, out of scope
Option C - Correct. this options states that banks are not charging customers by lowering their interest rates
Option D - Extraneous information, out of scope
Option E - Extraneous information, out of scope
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Re: The government provides insurance for individuals [#permalink]

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11 May 2017, 11:14
Good question. The conclusion states that the depositor bears the cost of the insurance. This would hold true if bank remains fair to the depositors. Option C eliminates one such possibility.
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Posts: 64
Re: The government provides insurance for individuals [#permalink]

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03 Oct 2017, 08:17
The government provides insurance for individuals' bank deposits, but requires the banks to pay the premiums for the insurance. Since it is depositors who primarily benefit from the security this insurance provides, the government should take steps to ensure that depositors who want this security bear the cost of it and thus should make depositors pay the premiums for insuring their own accounts.

Which of the following is assumed by the argument?

(A) Banks are not insured by the government against default on the loans the banks make.

(B) Private insurance companies do not have the resources to provide banks or individual with deposit insurance.

(C) Banks do not always cover the cost of the deposit-insurance premiums by paying depositors lower interest rates on insured deposits than the banks would on uninsured deposits.

(D) The government limits the insurance protection it provides by insuring accounts up to a certain legally defined amount only.

(E) The government does not allow banks to offer some kinds of accounts in which deposits are not insured.

It is an assumption question.

If we boil it down we get government should take premiums from the ultimate beneficiaries of the insurance. Since depositors are the beneficiaries, they should be charged, not the banks.

Missing information: The author assumes that the bank is taking the money indirectly from it's customers. If it is then the conclusion will no longer be valid. Hence c is the answer.
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Re: The government provides insurance for individuals [#permalink]

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19 Nov 2017, 18:43
stuck with C and D.
C is better than D b/c C directly links with the argument.
D is a strengthener, and D talks about another plan, so D moves the scope.
Re: The government provides insurance for individuals   [#permalink] 19 Nov 2017, 18:43
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