Directions: Read the passage/argument and answer the question that follows it.

The Federal Insurance Corp, which acts as the guarantor for all bank deposits in the US, estimates that over 1.5 million households will eventually be unable to meet their loan repayments during the next 5 years. The prices are falling and more forced sales due to failure of loan repayments will increase the already burgeoning stocks of unsold houses, which currently number upwards of 5 million.

The conclusion given in the first line of the paragraph above is based on which of the following assumptions?

Overall, the paragraph does not, at any point, address the issue of growth rate in case of home loans. Thus, Option (1) does not have any basis. Option (3) is again incorrect because even if it remains the sole guarantor, it does not impact the number of homes unable to repay their loans. This fact does not have any bearing on the issue at all. Option (4) is nothing but a corollary of the contents given in the paragraph. The assumption given in option (5) is utterly unjustified on the basis the information given in this case. Option (2) remains the best possible assumption underlying the conclusion as it presupposes that the households will have the same disposable income as before. Now, if we challenge this idea, there could be a real change in the ability of homeowners to service their loans. Thus, the Federal Insurance Corp’s conclusion certainly takes a beating because it remains the basis of all their calculations.