If a bank has assets of $5 billion and liabilities of $4.8 billion
A) its equity equals $.2 billion.
B) its equity equals -$.8 billion.
C) it faces a solvency crisis.
D) its equity equals -$.8 million and it faces a solvency crisis.

Question

Quizplus · Accepted Answer

Equity is calculated as Assets - Liabilities, therefore,
Equity = $5 billion - $4.8 billion = $.2 billion. The bank has positive equity, which means it is not facing a solvency crisis.

If a Bank Has Assets of $5 Billion and Liabilities