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When interest rates are high, insurance companies reduce the

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New post Updated on: 30 Jun 2018, 04:13
1
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A
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E

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Question Stats:

89% (01:23) correct 11% (01:46) wrong based on 934 sessions

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Which of the following most logically completes the argument below?

When interest rates are high, insurance companies reduce the premiums they charge for many kinds of insurance policies. The reason is that insurance companies want to take in as much money as possible in premiums so that they can invest the money at high rates of interest. And premium reductions help achieve this objective, since __________.

(A) interest rates are likely to decrease when large amounts of money are available for loans
(B) smaller insurance companies are not able to amass enough money to take advantage of investing at high interest rates
(C) insurance companies can sell many more insurance policies if they charge lower premiums than they would if they left premiums unchanged
(D) an increase in the number of policies sold eventually leads to an increase in the number of claims that an insurance company has to pay
(E) the number of claims that insurance companies pay increases at a higher rate than does the number of policies that the insurance companies can sell at the lower premiums

Originally posted by mohnish104 on 13 Nov 2013, 00:22.
Last edited by Vyshak on 30 Jun 2018, 04:13, edited 1 time in total.
Removed the poll as difficulty level gets adjusted automatically
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New post 13 Nov 2013, 01:57
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Because of "since", we need an assumption to complete the argument.

Which of the following most logically completes the argument below?

Fact: interest rates are high, insurance companies reduce the premiums they charge for many kinds of insurance policies.
Reason: insurance companies want to take in as much money as possible in premiums so that they can invest the money at high rates of interest.
Conclusion: Premium reductions help achieve this objective (take in as much money as possible), since __________.

How to take in as much money as possible --> insurance companies need to SELL as many insurance contracts as possible. <-- the assumption we need.

(A) interest rates are likely to decrease when large amounts of money are available for loans
Wrong. Nothing about interest rates decrease --> Not relevant.

(B) smaller insurance companies are not able to amass enough money to take advantage of investing at high interest rates
Wrong. Nothing about smaller/bigger companies --> Not relevant.

(C) insurance companies can sell many more insurance policies if they charge lower premiums than they would if they left premiums unchanged
Correct. C means, the more insurance policies sold, the more money took in.

(D) an increase in the number of policies sold eventually leads to an increase in the number of claims that an insurance company has to pay
Wrong. Nothing about claims --> Not relevant.

(E) the number of claims that insurance companies pay increases at a higher rate than does the number of policies that the insurance companies can sell at the lower premiums
Wrong. Nothing about claims --> Not relevant.

Hope it helps.
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New post 30 Nov 2014, 19:49
its between C and E.

bottom line, once you have narrowed down to 2 choice please always analyze them critically before you mark your answer choice. This is very important on 700 level questions.

E is bit tricky to understand (atleast for me, i am non-native), but when you reread it, basically it says that claim increase faster then sales that is completely wrong choice so eliminate.

Answer: C

mohnish104 wrote:
Which of the following most logically completes the argument below?

When interest rates are high, insurance companies reduce the premiums they charge for many kinds of insurance policies. The reason is that insurance companies want to take in as much money as possible in premiums so that they can invest the money at high rates of interest. And premium reductions help achieve this objective, since __________.

(A) interest rates are likely to decrease when large amounts of money are available for loans
(B) smaller insurance companies are not able to amass enough money to take advantage of investing at high interest rates
(C) insurance companies can sell many more insurance policies if they charge lower premiums than they would if they left premiums unchanged
(D) an increase in the number of policies sold eventually leads to an increase in the number of claims that an insurance company has to pay
(E) the number of claims that insurance companies pay increases at a higher rate than does the number of policies that the insurance companies can sell at the lower premiums

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New post 05 Jan 2019, 15:41
mohnish104 wrote:
Which of the following most logically completes the argument below?

When interest rates are high, insurance companies reduce the premiums they charge for many kinds of insurance policies. The reason is that insurance companies want to take in as much money as possible in premiums so that they can invest the money at high rates of interest. And premium reductions help achieve this objective, since __________.

(A) interest rates are likely to decrease when large amounts of money are available for loans
(B) smaller insurance companies are not able to amass enough money to take advantage of investing at high interest rates
(C) insurance companies can sell many more insurance policies if they charge lower premiums than they would if they left premiums unchanged
(D) an increase in the number of policies sold eventually leads to an increase in the number of claims that an insurance company has to pay
(E) the number of claims that insurance companies pay increases at a higher rate than does the number of policies that the insurance companies can sell at the lower premiums

Hi MartyMurray and GMATNinja,
How do someone convinced that the bold part is NOT the objective?
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When interest rates are high, insurance companies reduce the  [#permalink]

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New post Updated on: 06 Jan 2019, 19:39
AsadAbu wrote:
mohnish104 wrote:
Which of the following most logically completes the argument below?

When interest rates are high, insurance companies reduce the premiums they charge for many kinds of insurance policies. The reason is that insurance companies want to take in as much money as possible in premiums so that they can invest the money at high rates of interest. And premium reductions help achieve this objective, since __________.

(A) interest rates are likely to decrease when large amounts of money are available for loans
(B) smaller insurance companies are not able to amass enough money to take advantage of investing at high interest rates
(C) insurance companies can sell many more insurance policies if they charge lower premiums than they would if they left premiums unchanged
(D) an increase in the number of policies sold eventually leads to an increase in the number of claims that an insurance company has to pay
(E) the number of claims that insurance companies pay increases at a higher rate than does the number of policies that the insurance companies can sell at the lower premiums

Hi MartyMurray and GMATNinja,
How do someone convinced that the bold part is NOT the objective?

I don't see anything that clearly indicates that the bold part does not name the objective, or at least part of the objective.

So, what's to be done?

You can decide that the entire part of the sentence that follows "so" names the objective and hope that finding the correct answer choice won't require you to define the objective as only a part of what that part of the sentence names.

As it turns out, using that strategy works. The OA, (C), works if you decide that that entire part of the sentence names the objective. So, without worrying about whether only part of that part of the sentence names the objective, you get the right answer, which result makes sense, as otherwise the question would be flawed, because it's not clear that the part in bold is not part of the objective.
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Originally posted by MartyTargetTestPrep on 05 Jan 2019, 22:18.
Last edited by MartyTargetTestPrep on 06 Jan 2019, 19:39, edited 1 time in total.
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New post 06 Jan 2019, 02:19
MartyMurray wrote:
AsadAbu wrote:
mohnish104 wrote:
Which of the following most logically completes the argument below?

When interest rates are high, insurance companies reduce the premiums they charge for many kinds of insurance policies. The reason is that insurance companies want to take in as much money as possible in premiums so that they can invest the money at high rates of interest. And premium reductions help achieve this objective, since __________.

(A) interest rates are likely to decrease when large amounts of money are available for loans
(B) smaller insurance companies are not able to amass enough money to take advantage of investing at high interest rates
(C) insurance companies can sell many more insurance policies if they charge lower premiums than they would if they left premiums unchanged
(D) an increase in the number of policies sold eventually leads to an increase in the number of claims that an insurance company has to pay
(E) the number of claims that insurance companies pay increases at a higher rate than does the number of policies that the insurance companies can sell at the lower premiums

Hi MartyMurray and GMATNinja,
How do someone convinced that the bold part is NOT the objective?

I don't see anything that clearly indicates that the bold part does not name the objective, or at least part of the objective.

So, what's to be done?

You can decide that the entire part of the sentence that follows "so" names the objective and hope that finding the correct answer choice won't require you to define the objective as only a part of what that part of the sentence names.

As it turns out, using that strategy works. The OA, (B), works if you decide that that entire part of the sentence names the objective. So, without worrying about whether only part of that part of the sentence names the objective, you get the right answer, which result makes sense, as otherwise the question would be flawed, because it's not clear that the part in bold is not part of the objective.

The OA is C.
So, you mean: if the bold part is removed then the question will be flawed, right?
Thank you so much.
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Re: When interest rates are high, insurance companies reduce the  [#permalink]

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New post 06 Jan 2019, 19:38
AsadAbu wrote:
MartyMurray wrote:
AsadAbu wrote:
When interest rates are high, insurance companies reduce the premiums they charge for many kinds of insurance policies. The reason is that insurance companies want to take in as much money as possible in premiums so that they can invest the money at high rates of interest. And premium reductions help achieve this objective, since __________.

How do someone convinced that the bold part is NOT the objective?

I don't see anything that clearly indicates that the bold part does not name the objective, or at least part of the objective.

So, what's to be done?

You can decide that the entire part of the sentence that follows "so" names the objective and hope that finding the correct answer choice won't require you to define the objective as only a part of what that part of the sentence names.

As it turns out, using that strategy works. The OA, (C), works if you decide that that entire part of the sentence names the objective. So, without worrying about whether only part of that part of the sentence names the objective, you get the right answer, which result makes sense, as otherwise the question would be flawed, because it's not clear that the part in bold is not part of the objective.

So, you mean: if the bold part is removed then the question will be flawed, right?
Thank you so much.

Well, the correct answer would still be correct, but the logic underlying the premium reductions would not be completely clear. So, in the sense that the passage would not make complete sense, the question would be flawed.
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Marty Murray

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Marty@targettestprep.com
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122 Reviews

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self study course

See why Target Test Prep is the top rated GMAT quant course on GMAT Club. Read Our Reviews

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Re: When interest rates are high, insurance companies reduce the   [#permalink] 06 Jan 2019, 19:38
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