Tobin’s theory

Tobin’s theory in a nutshell:

Total portfolio consists of bonds & cash (W)
W = money + bond

The expected yield on holding bonds (Ye) is the interest earning on
bonds :
Ye = B. r (1)

The total risk (Rw) that the individual takes depends on the
uncertainty concerning bond prices (i.e. the uncertainty concerning
future interest rate movements), as well as the proportion of the
portfolio placed in bonds, the risky asset
Rw = B . Rg (2)

From equation (1) and (2), we can see that an increase in B
increases both the expected yield (Ye) as well as the portfolio
risk (Rw).