Final answer:
Trading and Available-for-Sale securities on a bank's balance sheet are reported at market value. This aligns with the bank's assets, providing a current market-based assessment reflecting the potential liquidation value of these securities.
Step-by-step explanation:
Trading and Available-for-Sale securities are reported on the balance sheet at market value. These types of securities are part of a bank's assets, alongside other financial instruments such as loans and government securities. On a balance sheet, these securities are assessed at current market value, as they represent assets that can be liquidated or sold in the market.
The net worth of a bank is calculated by subtracting the total liabilities from the total assets, which includes the market value of securities. The valuation at market value provides a realistic and up-to-date estimation of what the bank could receive if the assets were to be sold.
A bank's balance sheet is a reflection of its financial health. It demonstrates the bank's overall financial stability by showing its assets, such as trading and available-for-sale securities at market value, and its liabilities, ensuring the bank's net worth is accurately represented.