Final answer:
Assets on a bank's balance sheet include both physical cash and money owed to the bank, so all recorded assets may not be immediately available as cash due to the nature of banking operations. The value of loans in the secondary market is influenced by the borrower's payment history, the current economic interest rates compared to the loan's rate, and the financial status of the borrower.
Step-by-step explanation:
The money listed under assets on a bank's balance sheet does not necessarily represent physical currency available in the bank's vaults. Instead, a bank's assets include both physical cash and amounts owed by others. The concept of asset-liability time mismatch highlights that bank's liabilities, such as customer deposits, can be withdrawn in the short-term, whereas assets, like loans, are expected to be repaid in the long-term. Therefore, not all assets are readily available as cash at any given moment.
When considering the purchase of loans in the secondary market, various factors affect their value. If a borrower has been late on loan payments, this indicates a higher risk, which might make the loan less desirable and worth less. Conversely, if interest rates have risen, existing loans with lower rates become less attractive, decreasing their market value. If a borrower, particularly a firm, has declared high profits, it suggests they are more capable of meeting loan obligations, increasing the loan's value. Finally, if interest rates have fallen since the loan was issued, the older, higher-rate loans become more valuable as they offer better returns compared to new loans.