Additional Derivative Topics: Section 1 The Constant e and Continuous Compound Interest

Chapter 9
Additional
Derivative
Topics
Section 1
The Constant e and
Continuous Compound
Interest
Barnett, College Mathematics for Business, Economics, Life Sciences, and Social Sciences, 14e, GE
Copyright © 2019, 2015, 2011 Pearson Education Ltd. Slide 1
The Constant e
The irrational number e is a particularly suitable base for both

exponential and logarithmic functions.
This number was informally defined (Appendix A) as the

irrational number approximated by the expression
n
 1
1   for n sufficiently large.
 n
Definition: The Number e
n
 1
e  lim 1   or, alternatively, e  lim(1  s) s
1
n 
 n s0
Both of these limits are equal to e = 2.717 281 828 459 . . .
Compound Interest
Let P = principal, r = annual percentage interest rate,
t = time in years, m = number of compounding
periods per year, and A = amount realized at the end
of the time period.
Simple interest: A = P(1 + r)·t

mt
 r
Compound interest: A  P 1  
 m
Continuous compounding: A = P er·t
Theorem 1
Continuous Compound Interest Formula

If a principal P is invested at an annual rate r (decimal
form) compounded continuously, then the amount A in the
account at the end of t years is given by
r t
A  Pe
Continuous Compounding
The continuous compounding formula A = P er·t follows from
the compound interest formula with increasingly many
compounding periods. mt
 r
Consider P 1  
 m
m
mt  r t
 r  r r
lim P 1    P  lim 1  
m 
 m m 
 m
1 r t
 
 P  lim  1  s  s 
s 0
 
1 r t
 
 P  lim  1  s  s
 s 0 
 P  e r t
Example Comparing Compounding
Suppose $1,000 is deposited into a savings account that pays
5% interest per annum. Calculate the amount in the account
after 20 years.
Simple interest: A = 1000 (1 + 0.05·20) = $2,000
Compounded annually: A = 1000(1 + 0.05)20 = $2,653.30

36020
Compounded daily:  0.05 
A  1000 1    $2, 718.09
 360 
Compounded continuously: A = 1000 e0.05·20 = $2,718.28
Example Continuously
Compounded Interest
If $1,000 is invested at 6% interest compounded
continuously, what is the account balance after 5 years?
How much interest is earned on this investment?
Solution: A = P·er·t
= 1000 e0.06·5
= $1,349.86
The balance in the account after 5 years is $1,349.86.
With a $1,000 investment, the interest earned on the account
was $349.86.
Example Graph the
Growth of an Investment
A bank offers a 5-year certificate of deposit (CD) that earns
5.75% compounded continuously. If $1,000 is invested in
such a CD, graph the amount in the account as a function of
time for a 5-year period.
Give the table of values for the balances in the account for
each of the year.
Example Computing Growth Time
How long will it take an investment of $5,000 to grow to
$8,000 if it is invested at 6% compounded continuously?
Solution: Starting with the compound interest formula A=Per·t
we must solve for t.
8,000 = 5,000 e0.06·t
e0.06·t = 1.6
ln e0.06·t = ln 1.6
0.06t = ln 1.6
ln1.6
t
0.06
t ≈ 7.83 years
Computing Doubling Time
How long will it take for an investment to double if it is

invested at 5.75% compounded continuously?
Solution: An investment will double when the amount A is
twice the principal, P, that is, A = 2P.
At 5.75% continuous compounded interest we have:
A = 2P = P e0.0575·t
e0.0575·t = 2
ln e0.0575·t = ln 2
0.0575t = ln 2
ln 2
t
0.0575
t ≈ 12.05 years
Doubling Time
The doubling time for continuous compounded growth at r%

interest (expressed as a decimal) can be found using the
formula
ln 2
Doubling time, t 
r
Similarly, the tripling time, quadrupling time, etc. can be
found using
ln 3
Tripling time, t 
r
ln 4
Quadrupling time, t 
r
Chapter 9
Additional
Derivative
Topics
Section 2
Derivatives of
Exponential and
Logarithmic
Functions
The Derivative of ex
The process of finding the derivative of ex uses the fact that
eh  1
lim 1
h 0 h
Using the four step derivative process
Step 1: Find f(x + h) = ex+h = ex·eh
Step 2: Find f(x + h) – f(x) = ex·eh – ex = ex(eh – 1)
f ( x  h)  f ( x) e x (eh  1)  e h
1 
Step 3: Find  e 
x

h h  h 
Step 4: f ( x  h)  f ( x ) x  e 1 
h
Find f ( x)  lim  lim e  
h 0 h h 0
 h 
 eh  1  x
 e lim 
x
  e  1  e x
h 0
 h 
The Derivative of ex
The derivative of the exponential function, ex is the

exponential function ex.
d x
That is, e  ex .
dx
Caution 1: When using technology (calculator, etc.) make
sure that you use the designated e for the exponential
function.
Caution 2: The power rule cannot be used to differentiate the
exponential function, ex, that is,
d x
e  xe x 1.
dx
Review of Properties of ln x
Recall that the inverse of an exponential function is called a
logarithmic function.
For b > 0 and b ≠ 1, the logarithmic form y = logb x is
equivalent to the exponential form x = by.
The domain of the logarithmic function is (0, ∞) and the
range is (–∞, ∞).
The domain of the exponential function is (–∞, ∞) and the
range is (0, ∞).
Review of Properties of ln x
The graphs of y = logb x and y = bx are symmetric with respect
to the line y = x.
y = bx y = x
y = logb x
Of all of the possible bases for logarithmic functions, the two

most widely used are
log x = log10 x Common logarithm (base 10)
ln x = loge x Natural logarithm (base e)
Derivative of ln x
Let f(x) = ln x, x > 0.
Step 1: Find f(x + h) = ln (x + h)
Step 2: Find f(x + h) – f(x) = ln (x + h) – ln (x)
= ln x  h
x
Derivative of ln x Continued
f ( x  h)  f ( x) ln( x  h)  ln( x)
Step 3: Find 
h h
1 xh 1  h
 ln  ln 1  
h x h  x
x 1  h
(Multiply by 1 = x/x)   ln 1  
x h  x
1  x  h 
   ln 1   
x  h  x 
x
1  h h
  ln 1  
x  x
Derivative of ln x Continued
x
f ( x  h)  f ( x ) 1  h h
Step 4: Find f ( x)  lim  lim  ln 1  
h o h h 0 x
 x
1
  lim ln(1  s) s 
 1
x s 0  
1 1
  ln[lim(1  s) s ]
x s 0
1
  ln e
x
1

x
Note that this derivation used the new limit property:
If lim f ( x) exists and is positive, then lim[ln f ( x )]  ln[lim f ( x)].
x c x c x c
Example Finding Derivatives
Find y for the following functions.
(A) y = 3ex + 5 ln x
5
Solution: (A) y  3e x 
x
(B) y = x4 – ln x4
Solution: (B) Use a property of logarithms to rewrite.
y = x4 – ln x4 = x4 – 4 ln x
4
y  4 x3 
x
Other Logarithmic and
Exponential Functions
In most applications involving logarithmic and exponential
functions, the number e is the preferred base.
Some situations are better handled with a base other than e.
Derivatives of y = logb x and y = bx are obtained by expressing
these functions in terms of natural logarithmic and
exponential functions.
Change of Base for Logarithms
Find a relationship between logb x and ln x for any base b > 0
and b ≠ 1.
Write y = logb x in exponential form as by = x.
ln by = ln x
y ln b = ln x
1
y ln x
ln b
1
Therefore, log b x  ln x
ln b
Differentiating both sides of this result gives
d 1 d 1 1
log b x   ln x    for x  0.
dx ln b dx ln b  x 
Change of Base for Exponential
Find a relationship between bx and ex for any base b such that

b > 0, b ≠ 1.
y = bx
ln y = ln bx
ln y = x ln b
y = ex ln b
It can be shown that the derivative of the function ecx is cecx .
d x d x ln b
b  e  e x ln b ln b  b x ln b
dx dx
Summary of Derivatives of
Exponential and Logarithmic
Functions
For b  0, b  1,
d x d x
e  ex b  b x ln b
dx dx
For b  0, b  1,
d 1 d 1 1
ln x  log b x   
dx x dx ln b  x 
Examples
Find derivatives for (A) f (x) = log5 x (B) g (x) = 2x – 3x
1 1
Solution: (A) f ( x)   
ln 5  x 
(B) g ( x)  2 x ln 2  3x ln 3
Example Exponential Model
An online store sells guitar strings. If the store sells x sets of

guitar strings at a price of $p per set, then the price demand
equation is p = 12.5(0.998)x.
Find the rate of change of price with respect to demand when
the demand is 100 sets of guitar strings.
Interpret the result.
Solution: dp
 12.5(0.998) x ln 0.998
dx
dp
When x = 100,  12.5(0.998)100 ln 0.998  0.0205
dx
The price per set of strings is decreasing at a rate of about 2

cents per set when the demand is 100 sets of strings.
Example Continuous Compound
Interest
An investment of $10,000 earns interest at an annual rate of
4% compounded continuously.
(A) Find the instantaneous rate of change of the amount in
the account after 2 years.
Solution: The amount A(t) at time t (in years) is given by
A(t) = 10,000e0.04t
A´(t) = 400e0.04·t
A´(2) = 400e0.04·2 = 433.31
After two years, the account balance is growing at the rate of
$433.31 per year.
Example Continuous Compound
Interest
An investment of $10,000 earns interest at an annual rate of
4% compounded continuously.
(B) Find the instantaneous rate of change of the amount in the
account at the time the account has a balance of $20,000.
Solution: Recall that the amount A(t) at time t (in years) is
given by A(t) = 10,000e0.04t and
A´(t) = 400e0.04·t = 0.04·10000· e0.04·t = 0.04·A(t), that is, for
any time t, the rate of change in the amount is equal to 4% of
the balance in the account.
It follows that the rate of change in the account when the
balance is $20,000 is 4% of $20,000 which is $800.
Example Logarithm Model
A model for the growth of a sandwich shop franchise is
N(t) = –765 + 482 ln t
where N(t) is the number of locations in year t (t = 0
corresponds to 1980).
Estimate the number of locations in 2028 and
interpret the result.
Solution: The year 2028 corresponds to t = 48.
N(48) = –765 + 482 ln 48 ≈ 1,101
There will be approximately 1,101 locations in the year 2028.
Example Logarithm Model
A model for the growth of a sandwich shop franchise is
N(t) = –765 + 482 ln t where N(t) is the number of locations
in year t (t = 0 corresponds to 1980).
Estimate the rate of change in the number of locations in
2028.
Interpret the result.
Solution: The year 2028 corresponds to t = 48.
N´(t) = 482 1  482
t t
N´(48) = 482  10
48
The number of locations is growing at a rate of 10 per year in
the year 2028.
Chapter 9
Additional
Derivative
Topics
Section 3
Derivatives of Products
and Quotients
In Section 1.5, we found that the derivative of a sum is the

sum of the derivatives and the derivative of a difference is the
difference of the derivatives.
In this section, we consider if similar properties hold for

multiplication and division of functions.
We first “test” the theory with an example.
Let f(x) = 3x + 2 and g(x) = 2x – 3.
Determine if the derivative of the product (f(x)·g(x))´is equal
to the product of the derivatives, f ´(x)·g ´(x).
Solution: Find the product, f(x)·g(x).
f(x)·g(x) = (3x + 2)(2x – 3) = 6x2 – 5x – 6
Find the derivative of the product (f(x)·g(x))´.
(f(x)·g(x))´ = 12x – 5
Find the derivatives f ´(x) and g ´(x).
f ´(x) = 3 and g ´(x) = 2
f ´(x)·g ´(x) = 3·2 = 6 and (f(x)·g(x))´ = 12x – 5
Therefore, (f(x)·g(x))´ ≠ f ´(x)·g ´(x).
The derivative of a product is not the product of the
derivatives.
We found that the derivative of the product of two functions

is not the product of the derivatives of the two functions.
Using the definition of the derivative and the four-step
process, we can show that
The derivative of the product of two functions is the first

times the derivative of the second, plus the second times
the derivative of the first.
Theorem 1 Product Rule
If y = f(x) = F(x)·S(x)
(where F represents the First function in a product and S
represents the Second function in a product),
and if F ´(x) and S´(x) exist, then
f ´(x) = F(x)·S´(x) + S(x)·F´(x).
Using simplified notation,

dy dS dF
y´ = FS´ + SF´ or F S
dx dx dx
Example Differentiating a Product
Use two different methods to find f ´(x) for
f(x) = 2x2(3x4 – 2).
Solution: Method 1 Use the product rule with F(x) = 2x2 and
S(x) = 3x4 – 2.
f ´(x) = 2x2(3x4 – 2)´ + (3x4 – 2)(2x2)´
= 2x2(12x3) + (3x4 – 2)(4x)
= 24x5 + 12x5 – 8x
f ´(x) = 36x5 – 8x
Method 2 Multiply first, then find the derivative.
f(x) = 2x2(3x4 – 2) = 6x6 – 4x2
f ´(x) = 36x5 – 8x
Example Tangent Lines
Let f(x) = (2x – 9)(x2 + 6).
(A) Find the equation of the line tangent to the graph of f(x)
at x = 3.
Solution: Find the derivative f ´(x).
f ´(x) = (2x – 9)(x2 + 6)´ + (x2 + 6)(2x – 9)´
= (2x – 9)(2x) + (x2 + 6)(2)
Note: In this example, since we seek the slope of the tangent
line at x = 3 given by f ´(3), it is not required that we simplify
the derivative expression.
f ´(3) = (2·3 – 9)(2·3) + (32 + 6)(2)
= –18 + 30 = 12
The tangent to f(x) at x = 3, has slope 12.
Continued
Let f(x) = (2x – 9)(x2 + 6).
(A) Find the equation of the line tangent to the graph of f(x)
at x = 3.
Solution: We found that the tangent to f(x) at x = 3, has slope
12.
Evaluate f(3) = (2·3 – 9)(32 + 6) = (–3)(15) = –45.
Use the slope m = 12 and the point (x1, y1) = (3, –45) in the
point-slope form for a line y – y1 = m(x – x1).
y – (–45) = 12(x – 3)
y = 12x – 81
Let f(x) = (2x – 9)(x2 + 6).
(B) Find the value(s) of x where the tangent line is horizontal.
Solution: The tangent line is horizontal when its slope is zero.
We found the derivative to be
f ´(x) = (2x – 9)(2x) + (x2 + 6)(2).
We solve f ´(x) = (2x – 9)(2x) + (x2 + 6)(2) = 0.
6x2 – 18x + 12 = 0
x2 – 3x + 2 = 0
(x – 1)(x – 2) = 0
x = 1, 2
The tangent line is horizontal when x = 1 and x = 2.
The Derivative of the Quotient of
Two Functions
Consider the functions T(x) = x5 and B(x) = x2.
 T ( x) 
Show that the derivative of the quotient   is not equal to
 B ( x) 
T ( x)
the quotient of the derivatives, .
B( x)
T´(x) = 5x4 and B´(x) = 2x.
 T ( x)   x5  3 

B ( x )

  2   x   3 x 2
  x 
T ( x) 5 x 4 5 x 3
 
B( x) 2 x 2
 T ( x)  T ( x) The derivative of a quotient is not
Therefore     . equal to the quotient of the derivatives.
 B ( x)  B ( x)
Derivative of the Quotient of Two
Functions
The previous example shows that the derivative of the
quotient of two functions is not the quotient of their
derivatives.
The derivative of a quotient is a more complicated quotient
than expected.
If T(x) and B(x) are any two differentiable functions (where T
is the Top function and B is the Bottom function)
T ( x) B ( x)T ( x)  T ( x ) B( x)
f ( x)  then f ( x)  .
 B ( x) 
2
B( x)
The derivative of the quotient of two functions is the
denominator times the derivative of the numerator, minus the
numerator times the derivative of the denominator, divided by
the denominator squared.
Theorem 2 Quotient Rule
If T(x) and B(x) are any two differentiable functions (where
T is the Top function and B is the Bottom function)
T ( x)
if y  f ( x)  and if T ( x) and B( x) exist, then
B( x)
B ( x)T ( x)  T ( x) B( x)
f ( x) 
 B( x) 
2
Using simplified notation,

dT dB
B T
BT   TB dy
y  2
or  dx 2 dx
B dx B
Example Differentiating Quotients
x2
If f ( x)  , find f ( x).
2x 1
(2 x  1)( x )  ( x )(2 x  1)
2
 2
f ( x) 
(2 x  1) 2
(2 x  1)(2 x)  ( x )(2) 2
f ( x) 
(2 x  1) 2
4x  2x  2x
2 2
2x  2x
2
f ( x)  
(2 x  1) 2
(2 x  1) 2
Example Differentiating Quotients
t t
2
If y  3 , find y.
t 1
(t  1)(t  t )  (t  t )(t  1)
3 2 2 3
y 
(t  1)
3 2
(t  1)(2t  1)  (t  t )(3t )
3 2 2
y 
(t  1)
3 2
2t  t  2t  1  3t  3t
4 3 4 3
y 
(t  1)
3 2
t  2t  2t  1
4 3
y 
(t  1)
3 2
Example Sales Analysis
The total sales S (in thousands of games) of a video game t
months after the game is introduced are given by
125t 2
S (t )  2 .
t  100
(A) Find S´(t).
(t 2  100)(125t 2 )  125t 2 (t 2  100)
Solution : S (t ) 
(t 2  100) 2
(t 2  100)(250t )  125t 2 (2t )

(t 2  100) 2
250t 3  25000t  250t 3

(t 2  100) 2
25000t
S (t )  2
(t  100) 2
125t 2
S (t )  2 .
t  100
(B) Find S(10) and S´(10). Interpret these results.
125(10) 2 12500
S (10)  2   62.5
10  100 200
Total sales after 10 months are 62,500 games.
25000(10) 250000
S (10)    6.25
(10  100)
2 2
40000
Sales are increasing at a rate of 6,250 games per month.
125t 2
S (t )  2 .
t  100
(C) Use the results from part (B) of this example to estimate
the total sales after 11 months.
Since S(10) = 62,500 and S´(10) = 6,250, the estimated sales
after 11 months are 62,500 + 6,250 = 68,750 games.

Additional Derivative Topics: Section 1 The Constant e and Continuous Compound Interest

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Additional Derivative Topics: Section 1 The Constant e and Continuous Compound Interest

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Chapter 9

The irrational number e is a particularly suitable base for both

This number was informally defined (Appendix A) as the

Both of these limits are equal to e = 2.717 281 828 459 . . .

Simple interest: A = P(1 + r)·t

Continuous Compound Interest Formula

Compounded annually: A = 1000(1 + 0.05)20 = $2,653.30

How long will it take for an investment to double if it is

The doubling time for continuous compounded growth at r%

The derivative of the exponential function, ex is the

Of all of the possible bases for logarithmic functions, the two

Step 2: Find f(x + h) – f(x) = ln (x + h) – ln (x)

Find a relationship between bx and ex for any base b such that

Find derivatives for (A) f (x) = log5 x (B) g (x) = 2x – 3x

An online store sells guitar strings. If the store sells x sets of

The price per set of strings is decreasing at a rate of about 2

In Section 1.5, we found that the derivative of a sum is the

In this section, we consider if similar properties hold for

We first “test” the theory with an example.

We found that the derivative of the product of two functions

The derivative of the product of two functions is the first

Using simplified notation,

Using simplified notation,

Sales are increasing at a rate of 6,250 games per month.

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