GMAT Question of the Day: Daily via email | Daily via Instagram New to GMAT Club? Watch this Video

 It is currently 17 Feb 2020, 04:02

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

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

The government provides insurance for individuals' bank deposits, but

Author Message
TAGS:

Hide Tags

Intern
Joined: 16 Sep 2014
Posts: 6
The government provides insurance for individuals' bank deposits, but  [#permalink]

Show Tags

Updated on: 17 May 2018, 06:23
1
19
00:00

Difficulty:

45% (medium)

Question Stats:

70% (02:00) correct 30% (02:19) wrong based on 1028 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

Originally posted by lavanyak92 on 17 Sep 2014, 03:03.
Last edited by Bunuel on 17 May 2018, 06:23, edited 2 times in total.
Reformatted question
Retired Moderator
Joined: 25 Feb 2013
Posts: 1141
Location: India
GPA: 3.82
Re: The government provides insurance for individuals' bank deposits, but  [#permalink]

Show Tags

10 May 2017, 09:50
2
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
Joined: 19 Oct 2012
Posts: 254
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

11 May 2017, 10:14
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
Joined: 15 Nov 2016
Posts: 137
GMAT 1: 480 Q34 V22
Re: The government provides insurance for individuals' bank deposits, but  [#permalink]

Show Tags

03 Oct 2017, 07:17
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.
VP
Joined: 12 Dec 2016
Posts: 1452
Location: United States
GMAT 1: 700 Q49 V33
GPA: 3.64
Re: The government provides insurance for individuals' bank deposits, but  [#permalink]

Show Tags

19 Nov 2017, 17:43
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
Joined: 07 Apr 2018
Posts: 99
Re: The government provides insurance for individuals' bank deposits, but  [#permalink]

Show Tags

04 May 2018, 03:14
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

Hey abhimahna,

I am confused between options C and D.
Could you please explain why option C is correct?
Verbal Forum Moderator
Status: Greatness begins beyond your comfort zone
Joined: 08 Dec 2013
Posts: 2450
Location: India
Concentration: General Management, Strategy
Schools: Kelley '20, ISB '19
GPA: 3.2
WE: Information Technology (Consulting)
Re: The government provides insurance for individuals' bank deposits, but  [#permalink]

Show Tags

08 May 2018, 23:00
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

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
Manager
Joined: 31 Jul 2017
Posts: 220
Location: India
GMAT 1: 500 Q47 V15
GPA: 3.4
WE: Information Technology (Computer Software)
Re: The government provides insurance for individuals' bank deposits, but  [#permalink]

Show Tags

09 May 2018, 22:01
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

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

Manager
Joined: 31 May 2015
Posts: 130
Re: The government provides insurance for individuals' bank deposits, but  [#permalink]

Show Tags

17 May 2018, 06:22
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
Joined: 26 Dec 2017
Posts: 147
Re: The government provides insurance for individuals' bank deposits, but  [#permalink]

Show Tags

17 May 2018, 07:41
assumption is when that banks are not charging anything from customer as its paying their premium.
only c is inline.
Senior Manager
Joined: 26 Jun 2017
Posts: 389
Location: Russian Federation
Concentration: General Management, Strategy
WE: Information Technology (Other)
Re: The government provides insurance for individuals' bank deposits, but  [#permalink]

Show Tags

12 Dec 2018, 15:04
1
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

----
Senior Manager
Joined: 12 Dec 2015
Posts: 478
Re: The government provides insurance for individuals' bank deposits, but  [#permalink]

Show Tags

11 Jul 2019, 05:49
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
Non-Human User
Joined: 01 Oct 2013
Posts: 8319
Re: The government provides insurance for individuals bank  [#permalink]

Show Tags

21 Jan 2020, 09:31
Hello from the GMAT Club VerbalBot!

Thanks to another GMAT Club member, I have just discovered this valuable topic, yet it had no discussion for over a year. I am now bumping it up - doing my job. I think you may find it valuable (esp those replies with Kudos).

Want to see all other topics I dig out? Follow me (click follow button on profile). You will receive a summary of all topics I bump in your profile area as well as via email.
Re: The government provides insurance for individuals bank   [#permalink] 21 Jan 2020, 09:31
Display posts from previous: Sort by