Section 6.

3 Applications of Exponential Functions 1

6.3 Applications of Exponential Functions

In the previous review, we examined exponential growth. Any process in which a
quantity grows by a fixed percentage each year (or each day, hour, etc.) can be modeled
by an exponential function. Compound interest is a good example of such a process.

Discrete Compound Interest

If you put money in a savings account, then the bank will pay you interest (a percentage
of your account balance) at the end of each time period, typically one month or one
day. For example, if the time period is one month, this process is called monthly
compounding. The term compounding refers to the fact that interest is added to your
account each month and then in subsequent months you earn interest on the interest.
If the time period is one day, its called daily compounding. The exponential model
that describes this situation is called the discrete compound interest formula.

Discrete Compound Interest

If P0 is the principal, r is the annual interest rate, and n is the number of times
that interest is compounded per year, then the balance at time t years is
 r nt
P (t) = P0 1 + . (6.1)
n

I Example 1

If the principal is $100, the annual interest rate is 5%, and interest is compounded
daily, what will be the balance after ten years?

In formula (6.1), let P0 = 100, r = .05, n = 365, and t = 10:

.05 36510
 
P (10) = 100 1 + 164.87
365

Thus, you would have $164.87 after ten years. Note that the final calculation was done
using a calculator.

I Example 2

If the principal is $10 000, the annual interest rate is 5%, and interest is compounded
daily, what will be the balance after forty years?

In formula (6.1), let P0 = 10 000, r = .05, n = 365, and t = 40:

.05 36540
 
P (40) = 10 000 1 + 73 880.44
365

1
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2 Chapter 6

Thus, you would have $73 880.44 after forty years. Note that the final calculation was
done using a calculator.

Continuous Compound Interest and the Number e

If we start with the discrete compound interest formula (6.1) and let the number
of times compounded per year (n) approach , then we end up with what is known as
continuous compounding.

Continuous Compound Interest

If P0 is the principal, r is the annual interest rate, and interest is compounded

continuously, then the balance at time t years is
P (t) = P0 ert . (6.2)

Note that you will again need a calculator to do the final evaluation on the following
problems.

I Example 3

If the principal is $100, the annual interest rate is 5%, and interest is compounded
continuously, what will be the balance after ten years?

In formula (6.2), let P0 = 100, r = 0.05, and t = 10:

P (10) = 100e(0.05)(10)

Use your calculator to approximate this result. Thus, you would have $164.87 after ten
years.

I Example 4

If the principal is $10,000, the annual interest rate is 5%, and interest is compounded
continuously, what will be the balance after forty years?

In formula (6.2), let P0 = 10 000, r = 0.05, and t = 40:

P (10) = 10 000e(0.05)(40) 73 890.56

Thus, you would have $73 890.56 after forty years.

Properties of Logarithms;
Solving Exponential Equations
The usefulness of logarithms in calculations is based on the following three important
properties, known generally as the properties of logarithms.

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 Section 6.3 Applications of Exponential Functions 3

Properties of Logarithms

a) logb (M N ) = logb (M ) + logb (N )

 
M
b) logb = logb (M ) logb (N )
N

c) logb (M r ) = r logb (M )

provided that M, N, b > 0.

Change of Base Formula:

logb (x)
loga (x) =
logb (a)

I Example 5

Compute log2 (5).

Before applying the Change of Base Formula, lets see if we can estimate the value of
log2 (5). First recall that 2log2 (5) = 5. Now how large would the exponent on a base
of 2 need to be for the power to equal 5? Since 22 = 4 (too small) and 23 = 8 (too
large), we should expect log2 (5) to lie somewhere between 2 and 3. Indeed, applying
the Change of Base Formula with the common logarithm yields
log10 (5) log(5) .6989700043
log2 (5) = = 2.321928095.
log10 (2) log(2) .3010299957
According to the formula, we could instead use the natural logarithm to obtain the
same answer, as in
loge (5) ln(5) 1.609437912
log2 (5) = = 2.321928095.
loge (2) ln(2) .6931471806

Solving Exponential Equations

Property (c) (logb (M r ) = r logb (M )) is also used extensively to help solve exponential
equations, and thus will be an important tool when we work with applications. In
general terms, the main strategy for solving exponential equations is to (1) first isolate
the exponential, then (2) apply a logarithmic function to both sides, and then (3) use
property (c). Well illustrate the strategy with several examples.

I Example 6

Solve 8 = 5(3x ).

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4 Chapter 6

First isolate the exponential function on one side of the equation by dividing both sides
by 5:
1.6 = 3x

Then take the logarithm of both sides. Use either the common or natural log:
log(1.6) = log(3x )

Now use property (c) to move the exponent in front of the log on the right side:
log(1.6) = x log(3)

Finally, solve for x by dividing both sides by log(3):

log(1.6)
=x
log(3)
log(1.6)
Thus, the exact value of x is , and the approximate value is 0.42781574.
log(3)

If the base of the exponential is either 10 or e, the correct choice of logarithm leads
to a faster solution:

I Example 7

Solve 3 = 4ex .

3 = 4ex
= 0.75 = ex isolate the exponential
x
= ln(0.75) = ln(e ) apply the natural log function
= ln(0.75) = x since ln(ex ) = x
= x .2876820725

In this case, because the base of the exponential function is e, the use of the natural
log function simplifies the solution.

Exponential Growth and Decay

Exponential Growth Models
We so far have used exponential functions to model the growth of money. But we can
use the exact same analysis for quantities other than money. If P (t) represents the
amount of some quantity at time t years, and if P (t) grows at an annual rate r with
the growth continually added in, then we can conclude in the same manner that P (t)
must have the form

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 Section 6.3 Applications of Exponential Functions 5

P (t) = P0 ert , (6.3)

where P0 is the initial amount at time t = 0, namely P (0).

Exponential Growth

If a function P (t) grows continually at a rate r > 0, then P (t) has the form

P (t) = P0 ert , (6.4)

where P0 is the initial amount P (0). In this case, the quantity P (t) is said to
exhibit exponential growth, and r is the growth rate.

Applications of Exponential Growth

We will now examine the role of exponential growth functions in some real-world ap-
plications. In the following examples, assume that the population is modeled by an
exponential growth function as in formula (6.4).

I Example 8

Suppose that the population of a certain country grows at an annual rate of 2%. If the
current population is 3 million, what will the population be in 10 years?

This is a future value problem. If we measure population in millions and time in years,
then P (t) = P0 ert with P0 = 3 and r = 0.02. Inserting these particular values into
formula (6.4), we obtain
P (t) = 3e0.02t .

The population in 10 years is P (10) = 3e(0.02)(10) 3.664208 million.

I Example 9

In the same country as in Example 8, how long will it take the population to reach 5
million?

As before,
P (t) = 3e0.02t .

Now we want to know when the future value P (t) of the population at some time t will
equal 5 million. Therefore, we need to solve the equation P (t) = 5 for time t, which
leads to the exponential equation
5 = 3e0.02t .

Using the procedure for solving exponential equations that was presented in Section
8.6,

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6 Chapter 6

5 = 3e0.02t
5
= = e0.02t isolate the exponential
3
 
5
= ln = ln(e0.02t ) apply the natural log function
3
 
5
= ln = 0.02t since ln(ex ) = x
3
ln 53


= =t division
0.02
= t 25.54128.

Thus, it would take about 25.54 years for the population to reach 5 million.

The population of bacteria is typically measured by weight, as in the next two

examples.

I Example 10

Suppose that a size of a bacterial culture is given by the function

P (t) = 100e0.15t ,

where the size P (t) is measured in grams and time t is measured in hours. How long
will it take for the culture to double in size?

The initial size is P0 = 100 grams, so we want to know when the future value P (t) at
some time t will equal 200. Therefore, we need to solve the equation P (t) = 200 for
time t, which leads to the exponential equation
200 = 100e0.15t .

Using the same procedure as in the last example,

200 = 100e0.15t
= 2 = e0.15t isolate the exponential
= ln(2) = ln(e0.15t ) apply the natural log function
= ln(2) = 0.15t since ln(ex ) = x
ln(2)
= =t division
0.15
= t 4.620981.

Thus, it would take about 4.62 hours for the size to double.

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 Section 6.3 Applications of Exponential Functions 7

Exponential Decay Models

Weve observed that if a quantity increases continually at a rate r, then it is modeled
by a function of the form P (t) = P0 ert . But what if a quantity decreases instead? The
only difference is that the growth rate r in the formulas must be replaced by r since
the quantity is decreasing.

Exponential Decay

If a function P (t) decreases continually at a rate r > 0, then P (t) has the form

P (t) = P0 ert , (6.5)

where P0 is the initial amount P (0). In this case, the quantity P (t) is said to
exhibit exponential decay, and r is the decay rate.

Applications of Exponential Decay

The main example of exponential decay is radioactive decay. Radioactive elements and
isotopes spontaneously emit subatomic particles, and this process gradually changes
the substance into a different isotope. For example, the radioactive isotope Uranium-
238 eventually decays into the stable isotope Lead-206. This is a random process for
individual atoms, but overall the mass of the substance decreases according to the
exponential decay formula (6.5).

I Example 11

Suppose that a certain radioactive element has an annual decay rate of 10%. Starting
with a 200 gram sample of the element, how many grams will be left in 3 years?

This is a future value problem. If we measuring size in grams and time in years, then
P (t) = P0 ert with P0 = 200 and r = 0.10. Inserting these particular values into
formula (6.5), we obtain
P (t) = 200e0.10t .

The amount in 3 years is P (3) = 200e(0.10)(3) 148.1636 grams.

I Example 12

Using the same element as in Example 11, if a particular sample of the element decays
to 50 grams after 5 years, how big was the original sample?

This is a present value problem, where the unknown is the initial amount P0 . As before,
r = 0.10, so
P (t) = P0 e0.10t .

Since P (5) = 50, we have the equation

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8 Chapter 6

50 = P (5) = P0 e(0.10)(5) .

This equation can be solved by division:

50
(0.10)(5)
= P0
e
Finish by calculating the value of the left side to get P0 82.43606 grams.

I Example 13

Suppose that a certain radioactive isotope has an annual decay rate of 5%. How many
years will it take for a 100 gram sample to decay to 40 grams?

Use P (t) = P0 ert with P0 = 100 and r = 0.05, so

P (t) = 100e0.05t .

Now we want to know when the future value P (t) of the size of the sample at some
time t will equal 40. Therefore, we need to solve the equation P (t) = 40 for time t,
which leads to the exponential equation
40 = 100e0.05t .

Using the procedure for solving exponential equations that was presented in Section
8.6,

40 = 100e0.05t
= 0.4 = e0.05t isolate the exponential
= ln(0.4) = ln(e0.05t ) apply the natural log function
= ln(0.4) = 0.05t since ln(ex ) = x
ln(0.4)
= =t division
0.05
= t 18.32581.

Thus, it would take approximately 18.33 years for the sample to decay to 40 grams.

We saw earlier that exponential growth processes have a fixed doubling time. Sim-
ilarly, exponential decay processes have a fixed half-life, the time in which one-half the
original amount decays.

I Example 14

Using the same element as in Example 13, what is the half-life of the element?

As before, r = 0.05, so
P (t) = P0 e0.05t .

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 Section 6.3 Applications of Exponential Functions 9

The initial size is P0 grams, so we want to know when the future value P (t) at some
time t will equal one-half the initial amount, P0 /2. Therefore, we need to solve the
equation P (t) = P0 /2 for time t, which leads to the exponential equation
P0
= P0 e0.05t .
2
Using the same procedure as in the last example,

P0
= P0 e0.05t
2
1
= = e0.05t isolate the exponential
2
 
1
= ln = ln(e0.05t ) apply the natural log function
2
 
1
= ln = 0.05t since ln(ex ) = x
2
ln 12


= =t division
0.05
= t 13.86294.

Thus, the half-life is approximately 13.86 years.

The process of radioactive decay also forms the basis of the carbon-14 dating tech-
nique. The Earths atmosphere contains a tiny amount of the radioactive isotope
carbon-14, and therefore plants and animals also contain some carbon-14 due to their
interaction with the atmosphere. However, this interaction ends when a plant or ani-
mal dies, so the carbon-14 begins to decay (the decay rate is 0.012%). By comparing
the amount of carbon-14 in a bone, for example, with the normal amount in a living
animal, scientists can compute the age of the bone.

I Example 15

Suppose that only 1.5% of the normal amount of carbon-14 remains in a fragment of
bone. How old is the bone?

Use P (t) = P0 ert with r = 0.00012, so

P (t) = P0 e0.00012t .

The initial size is P0 grams, so we want to know when the future value P (t) at some
time t will equal 1.5% of the initial amount, 0.015P0 . Therefore, we need to solve the
equation P (t) = 0.015P0 for time t, which leads to the exponential equation

0.015P0 = P0 e0.00012t .

Using the same procedure as in Example 14,

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10 Chapter 6

0.015P0 = P0 e0.00012t
= 0.015 = e0.00012t isolate the exponential
0.00012t
= ln (0.015) = ln(e ) apply the natural log function
= ln (0.015) = 0.00012t since ln(ex ) = x
ln (0.015)
= =t division
0.00012
= t 34998.

Thus, the bone is approximately 34998 years old.

While the carbon-14 technique only works on plants and animals, there are other
similar dating techniques, using other radioactive isotopes, that are used to date rocks
and other inorganic matter.

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