Tobin's theory 3

A higher interest rate will cause the expected return risk relationship line to rotate up (for any level of risk, the expected return is now higher since interest rate is
higher). When this happens, the new optimum point will depend
upon the expected yield-risk preference of the individual. Hence,
when interest rate increases, it could result in an increase or a
decrease in the demand for money.

An increase in the riskiness of holding bond, on the other hand,
causes the expected return risk relationship line to rotate
downward. And the maximum portfolio risk is now Rw1. There
are again two possible new optimums and this again depends on
the individual’s expected yield-risk preference. Hence, the impact
of an increase in risk may increase or decrease the demand for
money.
An increase in W will increase the demand for money if factors
affecting the composition of portfolio (the rate of interest and
the risk of holding bonds) are constant.

Still one problem with money demand remains. There are other
low risk interest bearing assets: money market mutual funds, U.S.
Treasury Bills, and others. So why would anyone hold money as a
store of wealth?