The risk-free rate is 2% and the borrowing rate is 5%. The expected return on the risky asset is 11% and standard deviation is 17%. Describe the investment opportunity set available to investors in this case. Your answer should include a graph. 

Risk free asset = 2%

Borrowing Rate = 5%

ER on risky asset = 11%

Standard Deviation(S.D) = 17%

So we can see we have borrowing rate of 5 % and return on risky asset is 11 % with S.D of 17%

We can borrow funds @ 5% and invest in risky assets with return of 11%

This is an investment opportunity for an investor.

If the return on risky asset deviate downside i.e 11- 17%*11 = 9.13%

Then also we have very high probability that we will earn expected return of 9.13% after an year with a borrowing of 5%

then also we can earn around 9.13-5 = 4.13% return .

So investor have an opportunity set to have borrowed funds @ 5 % and invest in risky asset with expected retun of 11%