bank 3's assets are securities issued by bank 2, and etc. (follow the arrows in Figure 1). The loans held by dierent banks are all separate from each other. Throughout this question, you don't need to think in dollar values, but only need to think about values in proportional terms (e.g. loans are 20% of total asset value in the balance sheet above). Recall how investors are paid in bankniptcy: if a bank goes bankrupt, then its equity becomes worthless, and its debt holders get all remaining asset value with a \"haircut\". For instance, suppose L = II} (so equity is 19% of total assets), and suppose the asset value of a bank declines by 30%. Then, it goes bankrupt, and its equity becomes worthless. Its debt is now worth I??? = g as much as before. So the holders of its equity suffer a loss of 1U{l% (worthless now), and the holders of its debt suffer a proportional loss of 1 g = E m 22.2%. In all subquestions below, we want to gure out what happens if bank 1 suers a negative shock: the value of its loans suddenly becomes zero. [The \"bankissued securities\" on bank 1 balance sheet is not aected, and the loans held by other banks are also not aected.)