Question

Jay P Horgan Bank holds deposits of $700 million. The current market value of the bank's loans is $500 million. It also holds reserves of $40 million and government bonds worth $100 million. What is the value of the bank's total liabilities?
$700 million

$540 million

$640 million

$800 million

Answer 1

Answer:

$700 million

Explanation:

From a bank's perspective, liabilities are the money it owes to customers. Customer deposits make up a big proposition of a bank's liabilities. Customer deposits held in the bank are liabilities because the money belongs to customers and not the bank.

The deposits of $700 are the liabilities. Reserves are a part of customer deposits that must be retained at the bank's custody at all times. Bonds are trading assets to the bank.