Question

Stealth bank has deposits of $300 million. it holds reserves of $20 million and has purchased government bonds worth $300 million. the bank's loans, if sold at current market value, would be worth $600 million. what does stealth banks net worth equal

Answer 1

First let us identify if the asset is a gain or loss. An asset is a gain if it contributes to the banks overall finance while it is a loss if it is a cost directly or indirectly.

Deposits of $300 million = Gain (+)

Reserves of $20 million = Gain (+)

Purchased government bonds worth $300 million = Loss (-)         ---> This entails cost

Selling bank’s loans at current market value of $600 million = Gain (+)

Therefore adding up everything to get the banks net worth:

Stealth banks net worth = $300 M + $20 M - $300 M + $600 M

Stealth banks net worth = $620 million