The government provides insurance for individuals' bank deposits, but

Question

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

Similar question:  LINK

Bunuel · Accepted Answer

OFFICIAL EXPLANATION

(A) No. Only customer deposits are discussed in the passage, not bank loans.

(B) No. This is irrelevant since the passage states that the government provides the insurance.

(C) Yes.  The passage states that individuals do not pay for deposit insurance. This assumes that they do not pay indirectly through decreased benefits elsewhere.

(D) No. This is irrelevant since depositors still benefit from insurance protection up to the stated limit.

(E) No. Suppose the government did allow banks to offer some kinds of accounts which were not insured and which did not offer any additional benefits to the depositor (e.g., higher interest rates or lower fees). Then owners of insured deposits would receive the same benefits at no extra cost as owners of uninsured deposits, and the argument’s conclusion would still hold.

niks18 · Answer

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

TheMechanic · Answer

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.

KB04 · Answer

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.

chesstitans · Answer

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.

PP777 · Answer

Hey  abhimahna ,

I am confused between options C and D.
Could you please explain why option C is correct?

Skywalker18 · Answer

Hi PP777 , Conclusion - 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. Pre-thinking - The argument assumes that as of now customers are not paying the insurance premium by some other means. (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. - On negating this , the argument falls apart - Banks always cover the cost of 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. -- Incorrect - even if there is a limit of say 10,000 $ Up to which deposit is insured, does it affect that depositors need to pay for premium? Hope this helps!!

SSM700plus · Answer

Premise :- Govt. provides insurance for individuals' bank deposit but banks should pay premiums for the insurance. Depositors are directly beneficial from the security that insurance provides

Conclusion - depositors must pay the premiums for insuring their own accounts And Govt should take some steps in this direction.

Assumption :- Anything that hints towards - depositor not paying the fee directly or indirectly will be valid assumption.

(A) Banks are not insured by the government against default on the loans the banks make. -  Out of scope banks insured against default loans is not related to the discussion.

(B) Private insurance companies do not have the resources to provide banks or individual with deposit insurance.  - Resources availability of Private Companies is not in the scope of arguments

(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. 
 This choice correctly states the assumption. On reading carefully, we can understand that depositor need to pay the premium because banks do not always cover the cost of deposit - insurance by paying lower interest rates on insured deposits
Negating the statement breaks the conclusion. Hence it is right choice.

(D) The government limits the insurance protection it provides by insuring accounts up to a certain legally defined amount only.  - Limiting the insurance protection and insuring defined amount again breaks the conclusion

(E) The government does not allow banks to offer some kinds of accounts in which deposits are not insured. --  This is going against the conclusion

Answer - C

sony1000 · Answer

I do not get why E is wrong. If customer is not given a choice and forced to get only secured deposits why should he get charged for insurance...not clear to me.

tejyr · Answer

assumption is when that banks are not charging anything from customer as its paying their premium.
only c is inline.

DharLog · Answer

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. 
 Loans, not deposits

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

(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. 
 Good. If banks always cover the cost of the deposit-insurance premiums by paying depositors lower interest rates on insured deposits, than there will be no need to demand payments of these premiums from final users (depositors). The banks pay everything. So the conclusion folds. Thus it is our assumption

(D) The government limits the insurance protection it provides by insuring accounts up to a certain legally defined amount only. 
 Does not explain anything

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

Similar question:  LINK 
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hiranmay · Answer

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?

Analysis: assumption
conclusion: Because only depositor benefit from the insurance --> depositor should pay for the deposit insurance not the bank
Which can weaken the conclusion, if any premise that shows that bank also benefit from the insurance. 
So the assumption is that bank doesn't gain any benefit from the deposit insurance

(A) Banks are not insured by the government against default on the loans the banks make. --> irrelevant: we are talking about individual depositor insurance

(B) Private insurance companies do not have the resources to provide banks or individual with deposit insurance. --> private companies resources are irrelevant

(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. -->  correct : align w/ analysis

(D) The government limits the insurance protection it provides by insuring accounts up to a certain legally defined amount only. --> irrelevant: limit will not support the conclusion

(E) The government does not allow banks to offer some kinds of accounts in which deposits are not insured. --> some kind of uninsured deposits will not support the conclusion

navderm · Answer

You think every answer except the correct one is 'out of scope' ? :P

David nguyen · Answer

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.

Banks -> Pay Individual deposits INS
Individual -> Benefit from the INS 
Individual wants INS -> Individual should be charged

Which of the following is assumed by the argument?

Who should be paying for the INS is the central concern of the argument. Whether banks are insured by the gov against loan default is irrelevant. (A) is out
 
We are not worry about private insurance companies. Nowhere is this mentioned in the reasoning. (B) is out
 
This does not address who should pay. Whether the government limits the insurance protection depending on the amount does not affect the conclusion that Individuals should pay. (D) is out.
 
So this says that all of the account type must be insured. Okay, but who is going to pay for this? (E) is out.

I skipped reading this answer choice because it was long and hard to grasp at the first sight. Now It is the only remaining. Should It be the correct answer choice? Let's check

Banks -> not cover INS cost by giving lower IR for Insured-Deposit Account > Uninsured-deposit Account
Negation: Banks lower the IR that ID account can earn to cover the cost of INS. So the UD account is now making more Interest Income than ID account. This is saying that the ID account is paying for it, contradicting the conclusion. For this reason, (C) is the answer.

unraveled · Answer

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.
Note the highlighted part(since) in passage. It is the reasoning used by author behind her conclusion. It revolves around benefit a depositor gets. So, does no one - banks/govt - else benefits!!? This does not matter since benefit of depositor is concerned and no one else.
Although C is hard to decipher, POE helps since all other options fail.

A and B are irrelevant. D and E are not inferable.

Answer C.

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The government provides insurance for individuals' bank deposits, but

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