Exponents and Radicals
First we shall consider exponents.
Properties of Exponential Function
A Special Exponential Function
Among all exponential functions, f(x) = ex, x ∈ R is the most important one as it has applications in many areas like mathematics, science and economics. Then what is this e? The following illustration from compounding interest problem leads to the constant e.
We notice that as n gets really large, An values seem to be
getting closer to 2.718281815..... Actually An values approach a real
number e, an irrational number. 2.718281815 is an approximation to e. So the compound interest
formula becomes A = P ert, where r is the interest rate and P is the principal and t is the number of years. This is called Continuous Compounding.