Question

NOVA bank has deposits of $700 million. It holds reserves of $20 million and has purchased government ponds

worth $350 million. The bank's loans would be worth $600 million if sold at their current market value. What
does NOVA bank's net worth equal?

Answer 1

NOVA bank's net worth is calculated by subtracting its total liabilities ($700 million in deposits) from its total assets ($970 million, consisting of reserves, government bonds, and loans), resulting in a net worth of $270 million.

Step-by-step explanation:

To calculate NOVA bank's net worth, we first consider the bank's total assets and total liabilities. The bank's assets include its reserves, government bonds, and the current market value of its loans. The total assets are calculated as follows: $20 million in reserves plus $350 million in government bonds plus $600 million in loans, equaling $970 million. The bank's liabilities are primarily its deposits, which amount to $700 million.

Therefore, to obtain the bank's net worth, we subtract the total liabilities from the total assets: $970 million - $700 million, which equals $270 million. Hence, NOVA bank's net worth equals $270 million.