Exponential Functions

and Models
Lesson 2
By Carmen Gogu
Bastrop High School
Math Models

Contrast

Change at a constant rate

Rate of change (slope) is
a constant

Linear
Functions

Change at a changing rate

Change at a constant
percent rate

Exponential
Functions

Definition
An

exponential function

f ( x) C a

Note the variable is in the exponent

The base is a
C is the coefficient, also considered the initial value
(when x = 0)

Explore Exponentials
Given

f(1) = 3, for each unit increase in x, the

output is multiplied by 1.5
Determine the exponential function

f ( x) C a
x

f(x)

0.75

2
3
4

Explore Exponentials
Graph

these exponentials

f ( x) 2 1.1

g ( x) 4 0.9

What

do you think the coefficient C and the

base a do to the appearance of the graphs?

Contrast Linear vs.

Exponential
Suppose

you have a choice of two different jobs

at graduation
Start

at $30,000 with a 6% per year increase

Start at $40,000 with $1200 per year raise
Which
One

should you choose?

is linear growth
One is exponential growth

Which Job?

How do we get each next

value for Option A?
When is Option A better?
When is Option B better?
Rate of increase a
constant $1200
Rate of increase changing

Percent of increase is a constant

Ratio of successive years is 1.06

Year

Option A

Option B

$30,000

$40,000

$31,800

$41,200

$33,708

$42,400

$35,730

$43,600

$37,874

$44,800

$40,147

$46,000

$42,556

$47,200

$45,109

$48,400

$47,815

$49,600

$50,684

$50,800

10

$53,725

$52,000

11

$56,949

$53,200

12

$60,366

$54,400

13

$63,988

$55,600

Example
Consider

a savings account with compounded

yearly income
You

have $100 in the account

You receive 5% annual interest
At end of
year

View comple
ted table

Amount of interest earned

New balance in
account

100 * 0.05 = $5.00

$105.00

105 * 0.05 = $5.25

$110.25

110.25 * 0.05 = $5.51

$115.76

4
5

Compounded Interest

Completed

table

Compounded Interest
Table

of results from
calculator
Set

Y= screen
y1(x)=100*1.05^x
Choose Table ( Y)
Graph

of results

Compound Interest
Consider

an amount A0 of money deposited in

an account

Pays annual rate of interest r percent

Compounded m times per year
Stays in the account n years

Then

the resulting balance An

r
An A0 1
m

mn

Simple Interest
Simple

interest is a type of fee that is charged (or

paid) only on the amount borrowed (or invested),
and not on past interest.
Simple interest is generally used only on shortterm notes often on duration less than one year.
The amount invested (borrowed) is called the
principal (P).

Simple Interest
The

interest (fee) is usually computed as a

percentage of the principal (called the interest
rate(r)) over a given period of time (unless
otherwise stated, an annual rate).
Formula : I=Prt
I=interest
P=principal
r=annual simple interest rate ( in decimal form)
t=time in years

Simple Interest
When

solving financial mathematics problems,

ALWAYS specify all variables and their values.
To buy furniture for a new apartment, Megan
borrowed $4000 at 8% simple interest for 12
months. How much interest will she pay?
P=$4,000
r= 8%= 0.08
t= 12 months= 1 year
I=4,000*(0.08)*1= 320$

Future or Maturity Value for

Simple Interest.
If a principal P is borrowed at a rate r, then after
t years the borrower will owe the lender an
amount A that will include the principal P plus
the interest I. Since P is the amount borrowed
now and A is the amount that must be paid back
in the future, P is often referred to as the
present value and A as the future value. When
loans are involved, the future value is often
called the maturity value of the loan.
A= P + Prt= P*(1+rt)

Simple Interest-Future value

Find

the maturity value for a loan of $2000 to be

repaid in 6 months with interest of 9.4%.
P=$2,000
r= 9.4%=0.094
t= 6 months = 6/12=1/6 years
A=P*(1+rt)
A=2,000*(1+(0.094*1/6))=$2,031

Simple Interest-Present Value

of an Investment
If

you want to earn an annual rate of 15% on

your investments, how much (to the nearest
cent) should you pay for a note that will be worth
$6,000 in 8 months?
r= 15%=0.15
P=?
A= $6,000
t= 8/12=2/3 years
P=A/(1+rt)=6,000/(1+(0.15*2/3))=5,454.5$

Exponential Modeling

Population growth often modeled by exponential

function

Half life of radioactive materials modeled by

exponential function

Growth Factor
Recall

formula

new balance = old balance + 0.05 * old balance

Another

way of writing the formula

new balance = 1.05 * old balance

Why

equivalent?

Growth

factor: 1 + interest rate as a fraction

Decreasing Exponentials
Consider

a medication

Patient

takes 100 mg
Once it is taken, body filters medication out over
period of time
Suppose it removes 15% of what is present in
the blood stream every hour

Fill in the
rest of the
table

At end of hour

Amount remaining

100 0.15 * 100 = 85

85 0.15 * 85 = 72.25

3
4
5

What is the
growth factor?

Decreasing Exponentials
Completed

chart

Growth Factor = 0.85

Note: when growth factor < 1,
exponential is a decreasing
function

Graph

Solving Exponential Equations

Graphically
For

our medication example when does the

amount of medication amount to less than 5 mg
Graph the function
for 0 < t < 25
Use the graph to
determine when

M (t ) 100 0.85 5.0

t

General Formula
All

exponential functions have the general

format:
t

f (t ) A B

Where
A

= initial value
B = growth rate
t = number of time periods

Typical Exponential Graphs

When

B>1

f (t ) A B t
When

B<1

Using e As the Base

We

have used
Consider letting
Then

by substitution

Recall
It

y = A * Bt
B = ek

B = (1 + r)

turns out that

y = A * (ek)t
(the growth factor)

k r

Continuous Growth
The

constant k is called the continuous percent

growth rate
For Q = a bt
k

can be found by solving ek = b

Then
For
if

Q = a ek*t

positive a

k > 0 then Q is an increasing function

if k < 0 then Q is a decreasing function

Continuous Growth
For

Q = a ek*t

>0

<0

Assume a > 0

Continuous Growth

Q 3 e
the function
what is the
continuous growth rate?
The growth rate is the coefficient of t
0.4 t

For

Growth

Graph

rate = 0.4 or 40%

the function (predict what it looks like)

Converting Between Forms

Change

to the form Q = A*Bt

Q 3 e

0.4 t

We

know B = ek
Change to the form Q = A*ek*t

Q 94.5(1.076)
We

know k = ln B

(Why?)

Continuous Growth Rates

May

be a better mathematical model for some

situations

Bacteria

growth
Decrease of medicine
in the bloodstream
Population

growth of a large group

Example
A

population grows from its initial level of

22,000 people and grows at a continuous
growth rate of 7.1% per year.
What is the formula P(t), the population in
year t?
P(t)

= 22000*e.071t

By

what percent does the population increase

each year (What is the yearly growth rate)?
Use

b = ek

Assignment B
Lesson

5.3B
Page 417
Exercises 65 85 odd