ibps-so 2018 · Question 174 of 356

Which one of the following may most reasonably be inferred from the last paragraph of the passage?

1. AThat the author regards the forecasting of harvests and of epidemics as impossible
2. BThat the author holds meteorology to be the only eld in which prediction has any value
3. CThat the author expects computing power alone to remove the remaining uncertainty
4. DThat the author believes the public to be incapable of understanding any gure whatever
5. EThat the author would regard an economic forecast given as one con dent gure as less informative than one given as a range of outcomes with their likelihoods Directions (Q83–Q90) : The passage set out below is taken from an essay upon the law and the economics of the joint-stock company, a subject with which every o cer of a bank has a practical concern, since the greater number of the borrowers upon his books enjoy the very protection that the author examines. Read the passage carefully and answer the questions that follow it. Certain words have been printed in bold in order to help you to locate them while answering some of the questions. Some of the questions turn upon what the author has actually stated and others upon what may fairly be inferred from what he has stated; in every case your answer is to rest upon the passage alone and not upon any knowledge of the subject that you may bring to it from elsewhere. A man who buys a hundred shares in a company risks the price he paid for them and nothing more. If the company fails owing ten times the value of everything it possesses, its creditors may take what is left in the till, but they may not touch his house, his salary or his savings. The arrangement is so familiar that it is taken for a fact of nature. It is nothing of the kind. It is a creature of statute, granted in the middle of the nineteenth century after decades of argument, and denounced at the time by respectable opinion as a licence to gamble with other people's money. The case for it was practical rather than moral. A railway, a mill or a shipping line required more capital than any family could raise, which meant gathering the savings of thousands of strangers who could not possibly supervise the men entrusted with them. Under the older rule of unlimited liability, a modest holding carried an unbounded risk, and the prudent saver who could not inspect the books would not subscribe at all. Limiting the shareholder's exposure to the sum he had actually put in turned a share into something that could be valued, exchanged and held in small quantities alongside twenty others. Without that transformation there would have been no stock exchange worth the name, and no industrial economy of the kind that followed. The privilege has a price, and the price is paid by somebody else. Risk that is taken away from the shareholder does not evaporate; it is shifted to those who deal with the company. A bank, being in the business of lending, prices that risk, takes security and writes covenants into its documents. A supplier of raw material, extending thirty days of credit upon an invoice, does so far less carefully. And a person injured by the negligence of the company has extended no credit at all, has agreed to nothing, and stands in the queue behind everybody who did. The involuntary creditor is the awkward gure in the whole arrangement, and no amount of ingenuity in drafting has ever quite disposed of him. It is for this reason, and not from any love of forms, that the law surrounds the privilege with conditions: accounts that must be published, an audit that must be independent, dividends that may not be paid out of capital, a duty upon directors to stop trading once the company can no longer meet its debts, and a power in the court to set the whole protection aside where it has been used as a cloak for fraud. Compliance is onerous and is resented in exactly the quarters that bene t most from the bargain. A legislature that curtails those conditions while leaving the privilege untouched has not reduced the burden upon business; it has merely moved a further slice of it on to the creditor, who was never consulted. There is a subtler consequence still. Limited liability alters not merely who owns a business but what the business nds it worth doing, since a venture whose gains accrue to the shareholder and whose worst losses fall upon others is worth undertaking at odds that would otherwise be absurd. The e ect is at its plainest in banking, where the creditors are depositors, the depositors are protected by the state, and the state is in no position to write a covenant. Limited liability is therefore neither a natural right nor a swindle. It is a bargain struck between a legislature and the promoters of enterprise, and like any bargain its terms are worth reading again whenever it is o ered to a trade for which it was not originally designed.Correct