GMAT Question of the Day - Daily to your Mailbox; hard ones only

It is currently 18 Jul 2018, 19:01

Close

GMAT Club Daily Prep

Thank you for using the timer - this advanced tool can estimate your performance and suggest more practice questions. We have subscribed you to Daily Prep Questions via email.

Customized
for You

we will pick new questions that match your level based on your Timer History

Track
Your Progress

every week, we’ll send you an estimated GMAT score based on your performance

Practice
Pays

we will pick new questions that match your level based on your Timer History

Not interested in getting valuable practice questions and articles delivered to your email? No problem, unsubscribe here.

Close

Request Expert Reply

Confirm Cancel

The government provides insurance for individuals' bank deposits, but

  new topic post reply Question banks Downloads My Bookmarks Reviews Important topics  
Author Message
TAGS:

Hide Tags

Intern
Intern
avatar
Joined: 16 Sep 2014
Posts: 12
The government provides insurance for individuals' bank deposits, but [#permalink]

Show Tags

New post Updated on: 17 May 2018, 07:23
8
00:00
A
B
C
D
E

Difficulty:

  35% (medium)

Question Stats:

68% (01:35) correct 32% (01:54) wrong based on 682 sessions

HideShow timer Statistics

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

_________________

Please Consider providing Kudos If you like my posts


Originally posted by lavanyak92 on 17 Sep 2014, 04:03.
Last edited by Bunuel on 17 May 2018, 07:23, edited 2 times in total.
Reformatted question
PS Forum Moderator
avatar
D
Joined: 25 Feb 2013
Posts: 1182
Location: India
GPA: 3.82
GMAT ToolKit User Premium Member Reviews Badge
Re: The government provides insurance for individuals' bank deposits, but [#permalink]

Show Tags

New post 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
Senior Manager
Senior Manager
User avatar
G
Joined: 19 Oct 2012
Posts: 341
Location: India
Concentration: General Management, Operations
GMAT 1: 660 Q47 V35
GMAT 2: 710 Q50 V38
GPA: 3.81
WE: Information Technology (Computer Software)
Re: The government provides insurance for individuals' bank deposits, but [#permalink]

Show Tags

New post 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.
_________________

Citius, Altius, Fortius

Manager
Manager
User avatar
S
Joined: 15 Nov 2016
Posts: 135
Concentration: General Management, Leadership
CAT Tests
Re: The government provides insurance for individuals' bank deposits, but [#permalink]

Show Tags

New post 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.
SVP
SVP
avatar
P
Joined: 12 Dec 2016
Posts: 1874
Location: United States
GMAT 1: 700 Q49 V33
GPA: 3.64
GMAT ToolKit User Premium Member
Re: The government provides insurance for individuals' bank deposits, but [#permalink]

Show Tags

New post 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.
Manager
Manager
User avatar
G
Joined: 07 Apr 2018
Posts: 106
CAT Tests
Re: The government provides insurance for individuals' bank deposits, but [#permalink]

Show Tags

New post 04 May 2018, 04:14
lavanyak92 wrote:
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


Hey abhimahna,

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

Please +1 kudos if my post/reply helps !!

1 KUDOS received
Verbal Forum Moderator
User avatar
V
Status: Greatness begins beyond your comfort zone
Joined: 08 Dec 2013
Posts: 2080
Location: India
Concentration: General Management, Strategy
Schools: Kelley '20, ISB '19
GPA: 3.2
WE: Information Technology (Consulting)
GMAT ToolKit User Reviews Badge CAT Tests
Re: The government provides insurance for individuals' bank deposits, but [#permalink]

Show Tags

New post 09 May 2018, 00:00
1
PP777 wrote:
lavanyak92 wrote:
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


Hey abhimahna,

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


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!! :-)
_________________

When everything seems to be going against you, remember that the airplane takes off against the wind, not with it. - Henry Ford
The Moment You Think About Giving Up, Think Of The Reason Why You Held On So Long
+1 Kudos if you find this post helpful

Manager
Manager
avatar
G
Joined: 01 Aug 2017
Posts: 180
Location: India
Concentration: General Management, Leadership
Schools: ISB '20 (S), IIMA (S)
GMAT 1: 500 Q47 V15
GPA: 3.4
WE: Information Technology (Computer Software)
Premium Member Reviews Badge CAT Tests
Re: The government provides insurance for individuals' bank deposits, but [#permalink]

Show Tags

New post 09 May 2018, 23:01
lavanyak92 wrote:
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


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
_________________

If it helps you please press Kudos!

Thank You
Sudhanshu

Manager
Manager
User avatar
S
Joined: 31 May 2015
Posts: 81
GMAT ToolKit User
Re: The government provides insurance for individuals' bank deposits, but [#permalink]

Show Tags

New post 17 May 2018, 07:22
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.
_________________

GMAT loosers are born not made !!!

Manager
Manager
avatar
S
Joined: 26 Dec 2017
Posts: 126
Premium Member Reviews Badge CAT Tests
Re: The government provides insurance for individuals' bank deposits, but [#permalink]

Show Tags

New post 17 May 2018, 08:41
assumption is when that banks are not charging anything from customer as its paying their premium.
only c is inline.
_________________

--If you like my post pls give kudos

Re: The government provides insurance for individuals' bank deposits, but   [#permalink] 17 May 2018, 08:41
Display posts from previous: Sort by

The government provides insurance for individuals' bank deposits, but

  new topic post reply Question banks Downloads My Bookmarks Reviews Important topics  

Events & Promotions

PREV
NEXT


GMAT Club MBA Forum Home| About| Terms and Conditions and Privacy Policy| GMAT Club Rules| Contact| Sitemap

Powered by phpBB © phpBB Group | Emoji artwork provided by EmojiOne

Kindly note that the GMAT® test is a registered trademark of the Graduate Management Admission Council®, and this site has neither been reviewed nor endorsed by GMAC®.