Question

A bank initially has $190 million in assets and $150 million in liabilities. the banks net worth (capital) is _____________ million. if the bank’s assets increase by 10% and its liabilities do not change, its capital increases by ____________ .

Answer 1

Hi there

We know that the formula of the balance sheet is
Assets=liabilities+capital
So we want to find the amount of capital the formula is
Capital=assets-liabilities

The first answer is
Capital=190million−150million=40million...answer

The second answer
if the bank’s assets increase by 10% and its liabilities do not change
The amount of assets is
190+190×0.1=209million
And the amount of capital is
Capital=209−150=59million

capital increases by
59-40=19million. ..answer

Good luck!