Statement–Argument (Bank Term-Deposit Rates): Statement: Should banks offer only one rate of interest for term deposits of varying durations? Arguments: I) No, customers will refrain from longer lock-ins, reducing banks’ stable funding. II) Yes, a single rate is simpler for common people and may encourage deposits. Choose which argument is strong.

Introduction / Context:
Interest-rate term structures exist to align customer incentives with banks’ asset-liability needs. A strong argument should reference how pricing shapes behaviour and funding stability.

Given Data / Assumptions:

• Argument I: Without a term premium, customers prefer shorter deposits; banks lose predictable, longer-tenor funding.
• Argument II: Simplicity could attract deposits but ignores incentive design and mismatch risks.

Concept / Approach:
Pricing must signal duration value. A flat rate undermines the mechanism that compensates for longer commitment. Thus I is strong; II overvalues simplicity at the cost of financial stability.

Step-by-Step Solution:
Identify goal: secure stable funding.Assess I: Correctly predicts reduced long-term inflows under a flat rate ⇒ strong.Assess II: Simplicity is secondary and does not ensure appropriate duration mix ⇒ weak.

Verification / Alternative check:
Market practice globally differentiates rates by tenor, confirming I's mechanism.

Why Other Options Are Wrong:
“Only II” ignores stability; “either/neither” misjudges relative weight.

Common Pitfalls:
Equating easy-to-understand pricing with optimal behaviour shaping.

Final Answer:
if only Argument I is strong.