Annual returen rate

First, you mentioned the term (in average), so it should be interpreted as the geometric average rate of return in this case.
In the above example, let the annual rate of return be r%
$1000*(1 r%)^4 = $1556
1 r% = ($1556/$1000)^(1/4)
r = 11.7
From the above, it is easy to see that in order to compute the anuual rate of return of an investment, one should use the formula below :
initial investment*(1 r%)^n = account balance
i.e. r% = (account balance/initial investmeny)^(1/n) - 1
where r is the annual rate of return and n is the number of years.
Note that, however, this assumes that the annual rate of return in each year remains unchanged.
Actually, this is a simplified explanation, as it is already enough for cases in which you need to find the annual rate of return similar to your example. If you want to know more about the calculation of annual rate of return in other situations, I still recommend you to go to Wikipedia : http://en.wikipedia.org/wiki/Rate_of_return

2008-03-06 22:58:25 補充：
Due to some errors in the display of this webpage, please note that in the above, 1 r% should be read as 1+r% instead.