Individuals are risk adverse. Utility goes up. Straigt line is the possible combinations.
w0 no risk all held in cash. Vertical line is the max risk. wealth is multiplied by r+1
When interest rates change then the wealth will change. The Tobin analysis hold the wealth will change. When interest comes down wealth will fall. When wealth comes down then domend for money will come down as well.
We can also change the riskyness of bonds. This willcahnge the horisontal distance as people can have more maximum risk.