Summary of Exponential Functions
Basic Equation:

(
and

are always positive).
For exponential growth,

.
For exponential decay,

.
Note: If

you can still get exponential decay if you replace the basic equation by

.

is called the initial value of

since

value of

when

.
Discrete or Simple Growth Rate: Let us choose a unit of time
called

(for example,

might be one second, or one week, or 20 years).
Suppose that over some time interval I you observe a
percentage growth

,
expressed as a decimal (e.g.

).
Suppose that

is the size of

at the beginning of this time interval I. Then the size

units later is given by

,
where

is measured in units of size

.
For example, a "population"

increases at the rate of

every 10 years, over a period of 100 years (say I = the years
1700 to 1800). Let us take our unit

to be a decade; that is

.
Suppose, finally, that

is 12,000 at the beginning (the year 1700). Then the population

decades later will be

.
On the other hand, if you want the population

years later, then

decades,
so
This says that the annual percentage growth rate is about 1.6% (=0.016).
If you want to model a rate of decrease, or decay, of

percent in

units, then use the formula

.
For example, a 3.8% decay rate will give

.
Continuous Growth: Here the model is

,
where

,

,
(a percentage expressed as a decimal), and

are as before. This is based on the "continuous compounding" model, which is
why

appears. As long as

and

are not too big, the functions

and

are fairly close to each other. For large values of the percentage rate, the
continuous model is noticeably bigger.
Effective Rates: We can compare the continuous and discrete
growth models by asking: "What simple (discrete) growth rate

produces the same growth model as the continuous growth rate

?"
In other words, we set the models equal and solve for

:


is called the effective simple rate corresponding to
the continuous rate

.
In general,

because

.
If you are given

,
then you can find

using

.