[Hehe]

Why so complicated? And I think neither way is correct.

I do the following:

Money at start=A
Money at now=B

(B-A)/x=Average return per year where x is the year.

This would be the simplest way.

For more precise yearly figure you'd take the x root of (B-A)

Because you didn't say what number was used to come up with % figure at year 2. (assuming it's the balance of year one, then the return is a bit over 4%, or even slighter over 2% if compounded yearly)