Assume you have a retirement account opened on the first day of Year 1 with a deposit of $2,000. Over the next four years your investment account recorded the following returns:
Year 1 10.0%
Year 2 -16.0%
Year 3 10.0%
Year 4 16.0%
Based on these returns, what was the retirement account's arithmetic average return over the four year period? What was the account's geometric average return over that same period of time? In general terms, what best explains the difference in the calculated returns? Which return is the true historical return (given that these returns actually happened)? MAKE SURE YOU USE AT LEAST 4 DECIMAL PLACES (WHERE APPROPRIATE) AND SHOW ALL WORK (INCLUDING ANY FINANCIAL CALCULATOR KEYSTROKES) TO RECEIVE CREDIT.