A retail bank's sources of funds include savings, time, and checking (current) deposits. In June 2011, Hang Seng Bank, a leading Hong Kong bank, quoted interest rates of 0.01% on savings accounts, 0.15% on a 12-month time deposit, and nothing on checking accounts.

• Suppose that the bank incurs an additional 0.2% cost to administer checking accounts, and 0.1% cost for savings accounts and time deposits. List the three sources of funds in ascending order of annual cost per dollar of funds.
• Suppose that the bank has $2 billion of savings deposits, $5 billion of time deposits, and $3 billion of checking deposits. On a diagram with amount of funds in billions of dollars (from 0 to 10 billion) as the horizontal axis and cost in millions of dollars as the vertical axis, illustrate the (i) average variable cost of funds, and (ii) marginal cost of funds.

please include an explanation as to how the marginal cost is calculated in this scenario.