HPT $6$ Suppose that the borrowing rate, $fB=9\%$ is greater than the lending rate, $f=7\%.$ Show graphically how the optimal

ortfolio choice of some investors will be affected by the higher borrowing rate. Which investors will not be affected by the

rrowing rate? $-$All investors whose degree of risk aversion is such that they would hold the risky portfolio in a proportion

fual to $100\%$ or less $(y<mn\; id="EditorElement\_1441279">1</mn><mn\; id="EditorElement\_1441280">.</mn><mn\; id="EditorElement\_1441281">0</mn><mn\; id="EditorElement\_1441282">0</mn><mi\; id="EditorElement\_1441284">)</mi>$ are lending rather than borrowing, and so are unaffected by the borrowing rate. The least

sk$-$averse of these investors hold $100\%$ in the risky portfolio $(y=1).$ We can solve for the degree of risk aversion of these

:ut off" investors So solve $y=1=\frac{E(Rp)-rf}{A^{**}}$ variance $p)$ from the parameters of the investment opportunities: $/////$