Problem:
The expected return on the market is 12% and the risk-free rate is 7%. The standard deviation of the return on the market is 15%. One investor creates a portfolio on the efficient frontier with an expected return of 10%. Another creates a portfolio on the efficient frontier with an expected return of 20%.
Required:
Question: What is the standard deviation of the returns of the two portfolios?
Note: Please explain comprehensively and give step by step solution.