You invested $1,000 through your broker three years ago. Your account balance at the beginning of each period is shown in the table below.

Time Account balance Annual return

0 $1,000 n.a

1. $1,200

2. $1,500

3. $1,000

- Calculate the annual return for each year. Show your calculations in the table.

- Your broker called to tell you the good news that your average annual return over the three years has been 4%. Where did he get this number?