The net worth of a bank is the difference between the
A)value of retained earnings and the provision for loan losses.
B)market value of assets and the market value of liabilities.
C)book value of assets and book value of liabilities.
D)rate-sensitive assets and rate-sensitive liabilities.
E)None of the above.

Question

Quizplus · Accepted Answer

A bank's net worth is the difference between its market value assets and market value liabilities. This represents the bank's equity and measures its financial health and ability to absorb losses. Retained earnings and provision for loan losses are components of the bank's financial statements and do not necessarily reflect the actual market value of its assets and liabilities. Book value is also an accounting concept and does not reflect the true market value of assets and liabilities. Rate-sensitive assets and liabilities are a measure of a bank's interest rate risk, but do not necessarily reflect the market value of its balance sheet. Hence, option B is the correct choice.

The Net Worth of a Bank Is the Difference Between