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Q no.76

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

Official Answer : B

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