Enterprise Bank currently requires customers with checking accounts to maintain a minimum balance or pay a monthly fee. Enterprise plans to offer accounts with no monthly fee and no minimum-balance requirement; to cover their projected administrative costs of $3 per account per month they plan to charge $30 for overdrawing an account. Since each month on average slightly more than 10 percent of Enterprise's customers overdraw their accounts, bank officials predict the new accounts will generate a profit.


Which of the following, if true, most strongly supports the bank officials’ prediction?



A. Some of Enterprise Bank's current checking account customers are expected to switch to the new accounts once they are offered.


B. One third of Enterprise Bank's revenues are currently derived from monthly fees tied to checking accounts.


C. Many checking account customers who occasionally pay a fee for not maintaining a minimum balance in their account generally maintain a balance well above the minimum.


D. Customers whose checking accounts do not have a minimum-balance requirement are more likely than others to overdraw their checking accounts.


E. Customers whose checking accounts do not have a minimum-balance requirement are more likely than others to write checks for small amounts.


Let’s understand the details of the argument


Premises


  1. Enterprise Bank currently requires customers with checking accounts to maintain a minimum balance or pay a monthly fee.
  2.  Enterprise plans to offer accounts with no monthly fee and no minimum-balance requirement
  3. To cover the projected administrative costs of $3 per account per month (monthly fee if minimum balance is not maintained), they plan to charge $30 for overdrawing an account.
  4.  each month on average slightly more than 10 percent of Enterprise's customers overdraw their accounts


Conclusion of the argument/ the bank officials’ prediction


the new accounts will generate a profit


We need to find an option that supports the bank officials’ prediction


A- Some of Enterprise Bank's current checking account customers are expected to switch to the new accounts once they are offered.

The plan will only succeed if the customers overdraw their accounts. Option A says nothing about it. Eliminate


B- One-third of Enterprise Bank's revenues are currently derived from monthly fees tied to checking accounts.

Irrelevant. Eliminate


C- Many checking account customers who occasionally pay a fee for not maintaining a minimum balance in their account generally maintain a balance well above the minimum.

 Many customers who occasionally pay a fee for not maintaining a minimum balance generally maintain a balance well above the minimum. This does not tell us whether the new accounts will succeed or not. Eliminate


D-  Customers whose checking accounts do not have a minimum-balance requirement are more likely than others to overdraw their checking accounts.


Plan- To cover the projected administrative costs of $3 per account per month (monthly fee if minimum balance is not maintained), they plan to charge $30 for overdrawing an account.


If customers whose checking accounts do not have a minimum-balance requirement ( New accounts with no minimum-balance requirement ) are more likely than others to overdraw their checking accounts, they will end up paying $ 30 each time, leading to bigger profits. Therefore this supports the prediction that the new accounts will generate a profit. Correct


E- Customers whose checking accounts do not have a minimum-balance requirement are more likely than others to write checks for small amounts.

More likely to write checks for small amounts- Irrelevant. Eliminate