Question

Stealth bank has deposits of $700 million. It holds reserves of $20 million and has purchased government bonds worth $350 million. The bank's loans, if sold at current market value, would be worth $600 million. What does Stealth bank's net worth equal?

A. $120 million
B. $270 million
C. $1.02 billion
D. $970 million

Answer 1

The net worth of Stealth bank is calculated by subtracting its total liabilities (deposits) from its total assets (reserves, government bonds, and loans). The bank's net worth is $270 million, which corresponds to answer option B.

Step-by-step explanation:

To calculate the net worth of Stealth bank, we need to determine the difference between the bank’s total assets and its total liabilities. The bank’s total assets include reserves, government bonds, and the current market value of its loans. Its total liabilities are essentially its deposits. Based on the information provided:

• Total Assets = Reserves ($20 million) + Government Bonds ($350 million) + Loans ($600 million) = $970 million
• Total Liabilities = Deposits = $700 million

Net Worth = Total Assets - Total Liabilities = $970 million - $700 million = $270 million. Therefore, the correct answer is B. $270 million.