Explain the effect of introducing borrowing and lending at the risk-free rate on the efficient portfolios.

By introducing the risk free portfolios, we can have a combination of the assets on the efficient frontier and the risk free asset. Hence, we will have our asset on the line connecting these two points in between these two points or even to the right of efficient frontier by borrowing money from the risk free asset instead of borrowing. Hence, the implication is that we will get access to new kinds of portfolios which might be better in terms of risk and returns and hence might have better utility.