3) Consider the following figure taken from Hu, Xing, Pan and Wang (2018), which shows the nominal value of an account of 1 RMB invested in the year end of 1992 in a portfolio of small company stocks (ie the higher light red line) and a portfolio of large company stocks (i.e. the lower dark red line), together with the level of inflation (i.e. the green line). More specifically, holding the small company stocks portfolio until the year end of 2016 yields 105.07 RMB in your account, while holding the large company stocks portfolio until the year end of 2016 yields 3.90 RMB in your account. 200 100 Small Company (105.07 YE16) Large Company (3.90 YE16) Inflation ( 2.63 YE16) 50 ahh 20 10 Index 5 2 1 0.5 0.2 1992 1996 2000 2008 2012 2016 2004 Year-end Figure 2.1: Wealth indexes of Investments in the Chinese Capital Market (Year-End 1992 CNY 1.00) a) What is annualised nominal return on the portfolio of small company stocks? What is its annualised real return?- b) What is annualised nominal return on the portfolio of large company stocks? What is its annualised real return? 3) Consider the following figure taken from Hu, Xing, Pan and Wang (2018), which shows the nominal value of an account of 1 RMB invested in the year end of 1992 in a portfolio of small company stocks (ie the higher light red line) and a portfolio of large company stocks (i.e. the lower dark red line), together with the level of inflation (i.e. the green line). More specifically, holding the small company stocks portfolio until the year end of 2016 yields 105.07 RMB in your account, while holding the large company stocks portfolio until the year end of 2016 yields 3.90 RMB in your account. 200 100 Small Company (105.07 YE16) Large Company (3.90 YE16) Inflation ( 2.63 YE16) 50 ahh 20 10 Index 5 2 1 0.5 0.2 1992 1996 2000 2008 2012 2016 2004 Year-end Figure 2.1: Wealth indexes of Investments in the Chinese Capital Market (Year-End 1992 CNY 1.00) a) What is annualised nominal return on the portfolio of small company stocks? What is its annualised real return?- b) What is annualised nominal return on the portfolio of large company stocks? What is its annualised real return