5. Consider an investment bank called Stear Bearns. It has loans 2 500, investments : 700, and cash 2 300 on the asset side, and it has short-run debt 2 500 and longrun debt 2 700 on the liability side (all the gures are in billions of dollars). (a) Calculate the equity capital of Stear Bearns. (b) Draw their balance sheet. ((3) Calculate their leverage ratio. (d) By how much must the value of their investments fall for Steer Bearns to become bankrupt? (e) Draw their balance sheet once it has become bankrupt. (f) What would your advice to Stear Bearns be if the goal was to decrease the prob ability of defaulting? Why might Stear Bearns not have followed this path? (g) Suppose the government imposes a capital requirement, i.e., a maximum value for the leverage ratio. Take the Stear Bearns example above (with the initial balance sheet) and suppose the government imposes a maximum leverage ratio of 4. Suppose Stear Bearns is not able to adjust its longrun debt and has to adjust short-run debt to meet this requirement. Suppose moreover that it wishes to have at least 10% cash as a fraction of total assets but otherwise is happy to use cash to pay back debt and that it prefers to reduce investments rather than loans for any further asset deductions. What will its new balance sheet look like