Log out Go to App
Go to App

Learning Materials

Features

Discover

Chapter 27: Q.15 (page 662)

How do you calculate a bank's net worth?

Short Answer

Expert verified

The net worth of the bank is the capital of the bank in other words. It is the difference between the value of assets and liabilities.

Step by step solution

01

Concept introduction

Bank's net worth is calculated as its total assets minus its total liabilities. The difference between a bank's assets and liabilities is the bank's capital and it represents the net worth of the bank.

02

 : Explanation

The net worth of the bank is the capital of the bank in other words. It is the difference between the value of assets and liabilities. The assets of the bank include interest-earning loans like a letter of credit, mortgages and interbank loan and the liabilities of the bank includes any debt it owes and loan loss reserves.

Unlock Step-by-Step Solutions & Ace Your Exams!

  • Full Textbook Solutions

    Get detailed explanations and key concepts

  • Unlimited Al creation

    Al flashcards, explanations, exams and more...

  • Ads-free access

    To over 500 millions flashcards

  • Money-back guarantee

    We refund you if you fail your exam.

Start your free trial

Over 30 million students worldwide already upgrade their learning with Vaia!

One App. One Place for Learning.

All the tools & learning materials you need for study success - in one app.

Get started for free

Most popular questions from this chapter

What are a bank's assets? What are its liabilities?

For the following list of items, indicate if they are in M1, M2, or neither:

  1. Your 5,000 line of credit on your Bank of America card.
  2. 50 dollars’ worth of traveler’s checks you have not used yet .
  3. 1 in quarters in your pocket
  4. 1200 in your checking account
  5. 2000 you have in a money market account

How do banks create money?

Imagine that you are a barber in a world without

money. Explain why it would be tricky to obtain

groceries, clothing, and a place to live.

What is the double coincidence of wants?
See all solutions

What do you think about this solution?

We value your feedback to improve our textbook solutions.

Study anywhere. Anytime. Across all devices.

Sign-up for free