Consider the model of bank management outlined in class where banks manage reserves to meet deposit outflows subject to reserve requirements. Assume that the bank adjustment costs are proportional to the size of the bank reserve deficiency:Where x is outflow of deposits; f(x) is the probability distribution of x; p is the cost of meeting the reserve deficiency; A is the expected adjustment cost of the reserve deficiency; R are reserves, and r is the interest rate paid on earning assets. In this context: Discuss the fundamental trade-off in bank asset management [20 marks] What happens if the cost of obtaining marginal liquidity goes up? [40 marks]