GMAT Verbal Reasoning Practice Test 5

Question : 100 of 100

Marks: +1, -0

Financing for a large construction project was provided by a group of banks. When the money was gone before the project was completed, the banks approved additional loans. Now, with funds used up again and completion still not at hand, the banks refuse to extend further loans, although without those loans, the project is doomed.
Which of the following, if true, best explains why the bank’s current reaction is different from their reaction in the previous instance of depletion of funds?

The banks have reassessed the income potential of the completed project and have concluded that total income generable would be less than total interest due on the old plus the needed new loans.
The banks have identified several other projects that offer faster repayment of the principal if loans are approved now to get those projects started.
The banks had agreed with the borrowers that the construction loans would be secured by the completed project.
The cost overruns were largely due to unforeseeable problems that arose in the most difficult phase of the construction work.
The project stimulated the development and refinement of several new construction techniques, which will make it easier and cheaper to carry out similar projects in the future.

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