Question

Stealth bank holds deposits of $600 million. It holds reserves of $30 million and government bonds worth $80 million. The current market value of the bank's loans is $400 million. What is the value of the bank's total liabilities?

Answer 1

Answer:

$510 million

Explanation:

If Stealth bank holds deposits of $600 million but has a current market value of $400 million, It holds reserves of $30 million and government bonds worth $80 million.  

Therefore the value of the bank's total liabilities will be the fair value of the bank loans $400 million +  reserves of $30 million and government bonds worth $80 million.

Hence, the value of the bank's total liabilities is $510 million

Answer 2

Answer:

$600 million

Explanation:

Bank customers lend money to the banks by making deposits, so the bank's total liabilities are equal to their total amount of bank deposits that they hold.

Generally when we prepare a financial report, we consider bank loans as liabilities, but banks are on the other side of the fence. What we consider liabilities, they will consider assets. On the other hand, what we consider assets, e.g. checking account, CDs, etc., represent the bank's liabilities.