a. If an investor’s coefficient of risk aversion is A = 3, how does the optimal asset mix change? What are the new values of E(rC) and σC?

b. Suppose that the borrowing rate, r fB = 9%, is greater than the lending rate, rf = 7%. Show graphically how the optimal portfolio choice of some investors will be affected by the higher borrowing rate. Which investors will not be affected by the borrowing rate?