It is currently 18 Oct 2017, 06:33

### 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

# Events & Promotions

###### Events & Promotions in June
Open Detailed Calendar

# Which of the following best completes the passage below? As

Author Message
Intern
Joined: 22 Apr 2008
Posts: 36

Kudos [?]: 70 [0], given: 0

Which of the following best completes the passage below? As [#permalink]

### Show Tags

25 Jul 2008, 05:57
00:00

Difficulty:

(N/A)

Question Stats:

50% (00:27) correct 50% (01:39) wrong based on 15 sessions

### HideShow timer Statistics

Which of the following best completes the passage below?
As long as savings deposits are insured by the government, depositors will have no incentive to evaluate the financial strength of a savings bank. Yield alone will influence their choice of bank. To attract deposits, banks will be forced to offer the highest possible interest rates. And since paying higher rates inevitably strains the financial strength of a bank, ______

(A) the government will be forced o impose limitations on interest rates
(B) deposit insurance will ultimately lead to the financial weakening of many banks
(C) savers will be forced to choose between deposit insurance and higher interest rates
(D) deposits will tend to go to the banks with the greatest financial strength
(E) bank profits will tend to rise to ever-higher levels

I am afraid if such questions appear in my real GMAT i will never be able to achive my target

Kudos [?]: 70 [0], given: 0

Director
Joined: 12 Jul 2008
Posts: 514

Kudos [?]: 162 [1], given: 0

Schools: Wharton

### Show Tags

25 Jul 2008, 06:12
1
KUDOS
sjgmat wrote:
Which of the following best completes the passage below?
As long as savings deposits are insured by the government, depositors will have no incentive to evaluate the financial strength of a savings bank. Yield alone will influence their choice of bank. To attract deposits, banks will be forced to offer the highest possible interest rates. And since paying higher rates inevitably strains the financial strength of a bank, ______

(A) the government will be forced o impose limitations on interest rates
(B) deposit insurance will ultimately lead to the financial weakening of many banks
(C) savers will be forced to choose between deposit insurance and higher interest rates
(D) deposits will tend to go to the banks with the greatest financial strength
(E) bank profits will tend to rise to ever-higher levels

I am afraid if such questions appear in my real GMAT i will never be able to achive my target

Premise: Government insurance protects bank customers from banks' financial weakness, allowing customers to choose banks only based on interest rate.
Premise/Conclusion: Banks compete solely for customers based on interest rate, so banks are forced to raise interest rates.
Premise: As interest rates rise, the financial soundness of a bank falls.

Conclusion: (B) Deposit insurance will ultimately lead to the financial weakening of many banks

A: Stimulus doesn't mention any limitations on the governments' part or any desire to insure that banks are financially strong
C: Stimulus doesn't mention anything about deposit insurance for bank customers being available
D: Stimulus says the opposite -- that financial strength is not a criterion for customers choosing a savings bank
E: Stimulus says rising interest rates will weaken the financial stability of banks, not strengthen

Kudos [?]: 162 [1], given: 0

Senior Manager
Joined: 14 Mar 2007
Posts: 295

Kudos [?]: 39 [0], given: 3

Location: Hungary

### Show Tags

25 Jul 2008, 06:13
I think, B is the correct answer.

Kudos [?]: 39 [0], given: 3

Intern
Joined: 22 Apr 2008
Posts: 36

Kudos [?]: 70 [0], given: 0

### Show Tags

25 Jul 2008, 06:23
yes OA is B

I was unable to understand why B is ans.
Thanks for your explanation.It is clear now

Kudos [?]: 70 [0], given: 0

SVP
Joined: 07 Nov 2007
Posts: 1792

Kudos [?]: 1058 [0], given: 5

Location: New York

### Show Tags

25 Jul 2008, 21:28
clearly B
_________________

Smiling wins more friends than frowning

Kudos [?]: 1058 [0], given: 5

VP
Joined: 17 Jun 2008
Posts: 1374

Kudos [?]: 406 [0], given: 0

### Show Tags

25 Jul 2008, 21:41
sjgmat wrote:
Which of the following best completes the passage below?
As long as savings deposits are insured by the government, depositors will have no incentive to evaluate the financial strength of a savings bank. Yield alone will influence their choice of bank. To attract deposits, banks will be forced to offer the highest possible interest rates. And since paying higher rates inevitably strains the financial strength of a bank, ______

(A) the government will be forced o impose limitations on interest rates
(B) deposit insurance will ultimately lead to the financial weakening of many banks -> IMO B
(C) savers will be forced to choose between deposit insurance and higher interest rates
(D) deposits will tend to go to the banks with the greatest financial strength
(E) bank profits will tend to rise to ever-higher levels

I am afraid if such questions appear in my real GMAT i will never be able to achive my target

Good Question
Premise : As long as savings deposits are insured by the government, depositors will have no incentive to evaluate the financial strength of a savings bank . Yield alone will influence their choice of bank. To attract deposits, banks will be forced to offer the highest possible interest rates
this shows banks are under strain and are forced

evidence : And since paying higher rates inevitably strains the financial strength of a bank

after reading the argument we can say BANKS are under STRAIN due to high interset rates due to deposit insurance

now conclution ?
Only choiuce favouring this reasoning is B .All others are vague and far away
_________________

cheers
Its Now Or Never

Kudos [?]: 406 [0], given: 0

Manager
Joined: 03 Jun 2008
Posts: 133

Kudos [?]: 45 [0], given: 0

Schools: ISB, Tuck, Michigan (Ross), Darden, MBS

### Show Tags

26 Jul 2008, 01:29
B looks like the best option.
_________________

-----------------------------------------------------------
'It's not the ride, it's the rider'

Kudos [?]: 45 [0], given: 0

Manager
Joined: 23 Jan 2011
Posts: 128

Kudos [?]: 118 [0], given: 13

### Show Tags

05 Jul 2011, 18:38
zoinnk wrote:
sjgmat wrote:
Which of the following best completes the passage below?
As long as savings deposits are insured by the government, depositors will have no incentive to evaluate the financial strength of a savings bank. Yield alone will influence their choice of bank. To attract deposits, banks will be forced to offer the highest possible interest rates. And since paying higher rates inevitably strains the financial strength of a bank, ______

(A) the government will be forced o impose limitations on interest rates
(B) deposit insurance will ultimately lead to the financial weakening of many banks
(C) savers will be forced to choose between deposit insurance and higher interest rates
(D) deposits will tend to go to the banks with the greatest financial strength
(E) bank profits will tend to rise to ever-higher levels

I am afraid if such questions appear in my real GMAT i will never be able to achive my target

Premise: Government insurance protects bank customers from banks' financial weakness, allowing customers to choose banks only based on interest rate.
Premise/Conclusion: Banks compete solely for customers based on interest rate, so banks are forced to raise interest rates.
Premise: As interest rates rise, the financial soundness of a bank falls.

Conclusion: (B) Deposit insurance will ultimately lead to the financial weakening of many banks

A: Stimulus doesn't mention any limitations on the governments' part or any desire to insure that banks are financially strong
C: Stimulus doesn't mention anything about deposit insurance for bank customers being available
D: Stimulus says the opposite -- that financial strength is not a criterion for customers choosing a savings bank
E: Stimulus says rising interest rates will weaken the financial stability of banks, not strengthen

Doesn't this part mention deposit insurance:
As long as savings deposits are insured by the government

Kudos [?]: 118 [0], given: 13

Re: CR: Banks   [#permalink] 05 Jul 2011, 18:38
Display posts from previous: Sort by