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savings banks

by Ankitaverma » Mon Dec 09, 2013 11:16 am
Since savings banks have to use short-term deposits to finance long-term fixed-rate mortgage loans, they sometimes lose money when there is a rise in short-term rates and, on the other hand, they are unable to raise the rates on their mortgages.

(A) when there is a rise in short-term rates and, on the other hand, they are unable to raise
(B) when short-term rates rise and they are unable to raise
(C) when a rise in short-term rates occurs and, correspondingly, there is no rise possible in
(D) with a rise in short-term rates, and they are unable to raise
(E) with short-term rates on the rise and no rise possible in

Q/a-b
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by Mike@Magoosh » Mon Dec 09, 2013 3:24 pm
Ankitaverma wrote:Since savings banks have to use short-term deposits to finance long-term fixed-rate mortgage loans, they sometimes lose money when there is a rise in short-term rates and, on the other hand, they are unable to raise the rates on their mortgages.

(A) when there is a rise in short-term rates and, on the other hand, they are unable to raise
(B) when short-term rates rise and they are unable to raise
(C) when a rise in short-term rates occurs and, correspondingly, there is no rise possible in
(D) with a rise in short-term rates, and they are unable to raise
(E) with short-term rates on the rise and no rise possible in

Q/a-b
Dear Ankitaverma,
I'm happy to help. :-)

First of all, the purpose of the underlined section is to tell us the time when banks lose money. For a time, we need a "when" clause. The "with" options are awkward and incorrect. Both (D) & (E) are wrong.

We want to say these two things happened together
X = there is a rise in short-term rates
Y = they are unable to raise the rates on their mortgages
We just want to say both happen at once. We could just say
X and Y (very simple and clear)
or we could say
X, and at the same time, Y (more emphatic)
The structure
X and on the other hand Y
implies some kind of contrast, not just the fact that both happen at the same time. That's the problem with (A).
The structure
X and, correspondingly, Y
is strange. A correspondence is a pattern of matching. There's no particular pattern linking these two things --- all that's significant is that they both happen at the same time, no more, so there's no relevant correspondence here. That's the problem with (C).

The best answer here is choice (B).

Mike :-)
Magoosh GMAT Instructor
https://gmat.magoosh.com/
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