Consider the following historical returns on ROM shares. Assume the average risk-free rate during the 2014-2018 period was equal to 1.5%.

Year

2018 2017 2016 2015 2014 

ROM Return

6%

8% 10% 25% -8%

a) Calculate the arithmetic average return and the risk premium for ROM. (2 marks)

b) Calculate the geometric average return for ROM. (2 marks)

c) Calculate the standard deviation for ROM using the arithmetic average return. (3 marks)