Last month we talked about compound interest. This month we will use the compound interest concept and do a real-world problem, a kind of exercise often performed by financial analysts.

Netflix is a company that provides movies for viewing, either by streaming online or by mailing a DVD to your home. As a company, it has done extremely well. Its revenue (the total amount of money it receives from all of its customers) was $1.21B (billion) in 2007, $1.36B in 2008, and $1.67B in 2009. Here is the problem: What was Netflix’s average revenue growth rate from 2007 to 2009? If it continues to grow at that rate, how big will the revenue be in 2015?

Find out how to do this problem!