Bond risk and Tobin model question

QUESTION: 0n the Tobin graphs, show the optimal change in A (the portfolio weight on bonds) that would arise from a decrease in money risk, everything else constant. Assume, im = 0 and that am is always less than the Oh. You must start from a situation where am > 0, and assume a 5 0/50 portfolio to begin. The rst stage in the problem is getting the slope changes right in both diagrams and examining how WE and SE aect the choice of the new 7L. The market eects enter in the second stage. After providing the diagram, please answer the following 3 questions: a. Given 7L = B/(M+B), explicitly show the direction of change in 7L derived from SE and WE. b. In the market stage, explain how and why the risk premium on bonds changes. 0. Thinking of the problem in terms of the three-sector bond and money market shifts, what should happen to the price of goods P? Can you ShOW this through the equation underlying the money market