Graphically demonstrate the Fisher separation theorem for the case where an individual ends up lending in financial markets. Label the following points on the graph: initial wealth, Wo; optimal production/investment (Po, Pi); optimal consumption (Co, C1); present value of final wealth, Wa- QUESTION 2 Assume that the production investment opportunity set is given as: C = 2 1 - C3 What is the marginal rate of transformation? QUESTION 3 (CWS, Problem set 1.2) Graphically analyse the effect of an exogenous decrease in the interest rate on (a) the utility of borrowers and lenders (b) the present wealth of borrowers and lenders (c) the investment in real assets. QUESTION 4 (CWS, Problem set 1.6) Suppose your production opportunity set in a world of perfect certainty consists of the following possibilities: Project Investment Outlay Rate of Return (%) A $1,000,000 8 B 1,000,000 20 2,000,000 4 D 3,000,000 30 (a) Graph the production opportunity set in a Co, C framework. (b) If the market rate of return is 10%, draw in the capital market line for the optimal investment decisions.QUESTION 5 Why are indifference curves of typical investors assumed to slope upward to the right? QUESTION 6 Why are the indifference curves of more risk-averse investors more steeply sloped than those of investors with less risk aversion