Statement — “Banks should always check a client’s financial status before lending money.”\nAssumptions:\nI. Checking before lending gives a sufficiently true picture of the client’s financial status.\nII. Clients sometimes may not present the correct picture of their ability to repay the loan.

Introduction / Context:
Prudent lending policies rely on information quality and on guarding against misrepresentation. A directive to “always check” presupposes that checking is informative and that self-reports can be unreliable.

Given Data / Assumptions:

• Statement: Always verify the client’s financial status.
• Assumption I: Verification reveals a true or truer picture.
• Assumption II: Clients may sometimes misstate their repayment ability.

Concept / Approach:
If checks did not improve knowledge (I) or if clients’ disclosures were always accurate (II false), the “always check” rule would be unnecessary.

Step-by-Step Solution:
1) Necessity of I: Without informational gain, checks waste resources.2) Necessity of II: If clients never misrepresented, mandatory checks would be redundant.

Verification / Alternative check:
Asymmetric information and adverse selection in credit markets justify both assumptions.

Why Other Options Are Wrong:
Only I/Only II/Either: each omits part of the rationale. Neither: contradicts prudent banking.

Common Pitfalls:
Assuming checks are mere formality; they exist to mitigate risk.

Final Answer:
Both assumptions I and II are implicit.