If a bank's assets are $500 million and its liabilities are $380 million,then its net worth (bank capital)is ____________________.If the bank's assets then rise by 6 percent at the same time that its liabilities rise by 5 percent,the percentage change in the bank's net worth will be approximately _______________ percent.

Question

Quizplus · Accepted Answer

Net worth (or bank capital) can be calculated by subtracting liabilities from assets:

$500 million - $380 million = $120 million

Now, let's calculate the percentage change in net worth using the following formula:

% change in net worth = (% change in assets) - (% change in liabilities)

% change in assets = 6% 
% change in liabilities = 5%

% change in net worth = 6% - 5% = 1%

So the new net worth will be:

$120 million + 1% of $500 million = $125 million

Therefore, the percentage change in net worth is approximately 9.2%, which is closest to option D.

If a Bank's Assets Are $500 Million and Its Liabilities