Final answer:
Arrow Bank's total assets, when adding reserves of $40 million, government bonds worth $100 million, and loans at market value of $400 million, amount to $540 million. Thus, the correct response is option (b) $540 million.
Step-by-step explanation:
To calculate a bank's total assets, we must add up all the individual asset items. The assets of Arrow Bank consist of its reserves, the government bonds it holds, and its loans (if they are sold at market value). The deposits are a liability, not an asset. Given that Arrow Bank holds reserves of $40 million, government bonds worth $100 million, and if it sells its loans at the market value of $400 million, the total assets would be the sum of these items:
- Reserves: $40 million
- Government Bonds: $100 million
- Loans (at market value): $400 million
Adding these together ($40 million + $100 million + $400 million), we get a total of $540 million in assets for Arrow Bank. Therefore, the correct answer is option (b) $540 million.