3) In November 2014, Morgan Stanley, Citigroup, Deutsche Bank, and JP Morgan led the syndication of a three-year $300 million loan to Alibaba. The interest rate on the 2 loan was set at the London Interbank Offer Rate (Libor) plus a spread of 52 basis points (0.52%). Banks source funds from demand, savings, and time deposits, as well as the interbank market. However, Libor is relatively higher than interest rater on deposits. (Source: "Alibaba smashes Asian bond records, IFR Asia, November 22, 2014.) (a) Does Libor reflect a typical bank's average or marginal cost of funds? (b) For purposes of pricing, which is relevant - average or marginal cost? (c) Explain the banks' pricing policy in terms of the incremental margin percentage and the price elasticity of demand