Science:Math Exam Resources/Courses/MATH104/December 2014/Question 01 (j)

MATH104 December 2014

  •  Q1 (a)  •  Q1 (b)  •  Q1 (c)  •  Q1 (d)  •  Q1 (e)  •  Q1 (f)  •  Q1 (g)  •  Q1 (h)  •  Q1 (i)  •  Q1 (j)  •  Q1 (k)  •  Q1 (l)  •  Q1 (m)  •  Q1 (n)  •  Q2  •  Q3 (a)  •  Q3 (b)  •  Q3 (c)  •  Q4  •  Q5 (a)  •  Q5 (b)  •  Q5 (c)  •  Q5 (d)  •  Q5 (e)  •  Q5 (f)  •  Q6  •  

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Question 01 (j)
An investment earns at an annual interest rate $5\%$ compounded continuously. How fast is the investment growing when its value is $\$500$?

Make sure you understand the problem fully: What is the question asking you to do? Are there specific conditions or constraints that you should take note of? How will you know if your answer is correct from your work only? Can you rephrase the question in your own words in a way that makes sense to you?

If you are stuck, check the hints below. Read the first one and consider it for a while. Does it give you a new idea on how to approach the problem? If so, try it! If after a while you are still stuck, go for the next hint.

Hint 1
First, set up the model that describes the value of the investment as a function of time $t$ in years.

Hint 2
Recognize P as satisfying $P'=kP$.

Checking a solution serves two purposes: helping you if, after having used all the hints, you still are stuck on the problem; or if you have solved the problem and would like to check your work. If you are stuck on a problem: Read the solution slowly and as soon as you feel you could finish the problem on your own, hide it and work on the problem. Come back later to the solution if you are stuck or if you want to check your work. If you want to check your work: Don't only focus on the answer, problems are mostly marked for the work you do, make sure you understand all the steps that were required to complete the problem and see if you made mistakes or forgot some aspects. Your goal is to check that your mental process was correct, not only the result.

Solution 1

Found a typo? Is this solution unclear? Let us know here. Please rate my easiness! It's quick and helps everyone guide their studies. Since the annual interest rate is $5\%$ compounded continuously, the model that we use is $P(t)=P_{0}e^{0.05t}$, where $P(t)$ is the value of the investment after time $t$ in years, and $P_{0}$ is the initial amount invested. We want to find $P'(t)$ when $P(t)=500$. Taking the derivative of $P(t)$ yields $P'(t)=P_{0}(0.05)e^{0.05t}$ and solving for the time $t^{*}$ when $P(t^{*})=500$ we find that ${\begin{aligned}500&=P(t^{*})\\500&=P_{0}e^{0.05t^{*}}\\t^{*}&={\frac {\ln \left({\frac {500}{P_{0}}}\right)}{0.05}}\end{aligned}}$ Putting those two results together we obtain ${\begin{aligned}P'(t^{*})&=P_{0}(0.05)e^{0.05t^{*}}\\&=P_{0}(0.05)e^{0.05{\frac {\ln \left({\frac {500}{P_{0}}}\right)}{0.05}}}\\&=P_{0}(0.05)e^{\ln \left({\frac {500}{P_{0}}}\right)}\\&=P_{0}(0.05){\frac {500}{P_{0}}}\\&=(0.05)(500)\\&=25\end{aligned}}$

Solution 2

Found a typo? Is this solution unclear? Let us know here. Please rate my easiness! It's quick and helps everyone guide their studies. Since the annual interest rate is $5\%$ compounded continuously, the model that we use is $P(t)=P_{0}e^{0.05t}$, where $P(t)$ is the value of the investment after time $t$ in years, and $P_{0}$ is the initial amount invested. We want to find $P'(t)$ when $P(t)=500$. Take $\ln$ of both sides in the model and then differentiate with respect to $t$: ${\begin{aligned}\ln {P(t)}&=\ln {P_{0}}+0.05t\\{\frac {1}{P(t)}}P'(t)&=0.05\\P'(t)&=0.05P(t)\end{aligned}}$ When the investment is $P(t)=500$, $P'(t)=0.05(500)=25$.

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