Question

Stealth Bank has deposits of $700 million. It holds reserves of $70 million and has purchased government bonds worth $215 million. The bank's loans have a market value of $490 million. What does Stealth Bank's net worth, or equity capital, equal?

Answer 1

Stealth Bank's net worth is calculated by subtracting its total liabilities of $700 million from its total assets of $775 million, which includes reserves, government bonds, and loans. The net worth of Stealth Bank is $75 million.

Step-by-step explanation:

To calculate the net worth or equity capital of Stealth Bank, we need to subtract its total liabilities from its total assets. In this scenario, the total assets are the sum of the bank's reserves, government bonds, and loans, amounting to $70 million in reserves, $215 million in government bonds, and $490 million in loans. Hence, the total assets are $775 million ($70 million + $215 million + $490 million).

The total liabilities of the bank are its deposits, which are $700 million. The net worth can then be calculated as follows:

Total Assets - Total Liabilities = Net Worth
$775 million - $700 million = $75 million

Therefore, Stealth Bank's net worth is $75 million.

Answer 2

$75 million

Step-by-step explanation:

Given that:

Reserve value = $70 million

Purchased government bond = 215 million

Market value of loan = $490 million

Net worth :

Assets - liability

Assets = (Market value of loan + purchased government bond + reserve value)

(490 million + 215 million + 70 million)

275 million + 70 million

= $775 million

Liability = Deposits = $700 million

Net worth = ($775 - $700) million

Net worth = $75 million