Question

What are the largest asset and the largest liability of a typical​ bank? A. Loans are the largest liability and deposits are the largest asset of a typical bank. B. Cash in its vault is the largest asset and bonds are the largest liability of a typical bank. C. Reserves are the largest asset and deposits are the largest liability of a typical bank. D. Loans are the largest asset and deposits are the largest liability of a typical bank.

Answer 1

Answer:

D. Loans are the largest assets and deposits are the largest liabilities

Explanation:

Banks represent financial institutions wherein customers can either save their money or borrow money. Banks ideally serve as an intermediary between borrowers and lenders.

Banks avail funds from the lenders who want to deposit and keep their money safe. Such depositors are paid an interest on the money deposited. Out of the pool of funds created through such deposits, a bank lends these funds to the borrowers who are in need at a rate higher than the rate it provides to it's depositors.

Thus, the money granted as loan to the borrowers by a bank represent it's largest assets, which it will receive in future. While deposits, which the bank has to return to the depositors upon demand, represent a bank's largest liabilities which it must meet.