A bank has on-balance-sheet assets with a book value of $940 million and a market value of $985 million and on-balance-sheet liabilities with a book value of $900 million and a market value of $930 million. The bank also has off-balance-sheet assets currently valued at $150 million and off-balance-sheet liabilities worth $160 million. Stockholder's net worth should be valued at _________________ million.

Question

Quizplus · Accepted Answer

The market value of on-balance-sheet assets ($985 million) exceeds the market value of on-balance-sheet liabilities ($930 million) by $55 million. Adding the off-balance-sheet assets ($150 million) and subtracting the off-balance-sheet liabilities ($160 million) shows that the bank’s total market value exceeds its total book value by $45 million. This represents the stockholder’s net worth, so the best choice is C for $45 million.

A Bank Has On-Balance-Sheet Assets with a Book Value of $940