Exponential Models

Graph of Exponential Function

The graph of an exponential function defined by
f(x) = bˣ where b > 0 and b ≠ 1 indicates that:

• It is an increasing function,
sometimes called an exponential
growth function if b > 1.
• It is a decreasing function,
sometimes called an
exponential decay function if 0 < b < 1.
Activity 1
1. When a quantity increases by 20%, how does its new
value compare to its original value? That is, what is
the ratio of the new value to the original value?
Complete the table below to discover your answer.
Activity 1
2. What is the ratio of the new value to the original
value of any quantity that increases by 20%?

3. Use the common ratio you obtained in the table to

fine the new value of the quantities in Column 1.
What did you do?
a. _________________________________
b. _________________________________
c. _________________________________
d. _________________________________
Activity 1
4. Using the procedure you have done in No. 3,
find the new value of a television set that
increased by 20% over the original value of
₱4, 500.00.
_________________________________
_________________________________
_________________________________
Growth Factor
Growth factor - formed by adding the specified
percent increase to 100% and then changing to
its decimal form

The growth factor in Activity 1 that corresponds

to a 20% increase is
100% + 20% = 120%

But, 120% = 1.20 in decimal form.

Example 1
Determine the growth factor of the quantity
that increases by the given percent.

a. 50% b. 75% c. 10% d. 12.5%

Solution to Example 1
a. For 50% : 100% + 50% = 150% = 1.50
b. For 75%: 100% + 75% = 175% = 1.75
c. For 10%: 100% + 10% = 110% = 1.10
d. For 12.5%: 100% + 12.5% = 112.5% = 1.125
When a quantity increases by a specified
percent, like 20% in Activity 1, it’s new value can
be obtained by multiplying the original value by
the corresponding growth factor. That is,

Original value ∙ growth factor = new value

Example 2
Emerson deposits ₱50,000 in a savings account.
The account pays 6% annual interest. If he
makes no more deposits and no withdrawals,
calculate his new balance after 10 years.
Solution to Example 2
The interest represents a 6% rate of growth
per year, so the growth factor or the constant
multiplied is 100% + 6% = 106% or 1.06. To
find an equation that can be used to find the
new balance after any number of years by
considering the yearly calculations, we have:
Solution to Example 2

We can now use this equation y = 50 000 (1.06)ˣ, where x

represents time in years and y represents the new balance in
pesos. To find the new balance after 10 years, we have:
y = 50 000 (1 .06)¹⁰
= 89 542.38
The new balance after 10 years is ₱89 542.38
Exponential Growth
The rule for exponential growth can be
modeled by
Y = abˣ

where a is the starting number, b is the growth

factor, and x is the number of intervals
(minutes, years, and so on).
Example 3
A bacteria grows at a rate of 25% each day.
There are 500 bacteria today. How many will
there be?

a. tomorrow?
b. one week from now?
c. one month from now?
Solution to Example 3
a. Using the formula y = abˣ where a = 500, b =
1.25, and x = 1 then
y = 500(1.25)¹ Substitute 500 for a,
= 625 1.25 for b, and 1 for x.

There will be 625 bacteria tomorrow.

Solution to Example 3
b. Using the formula y = abˣ where a = 500, b =
1.25, and x = ?, then
y = 500(1.25)⁷ Substitute 500 for a,
= 2 384.19 1.25 for b, and 7 for x.

There will be 2,384 bacteria one week from

now.
Solution to Example 3
c. Using the formula y = abˣ where a = 500,
b = 1.25, and x = ?, then
y = 500(1.25)ᶟ⁰ Substitute 500 for a,
= 403,896.78 1.25 for b, and 30 for x.

There will be 403,897 bacteria one month from

now.
Exponential Growth Models
• If a certain quantity increases by a fixed percent
each year (or any other time period), the amount y
of that quantity after t years can be modeled by the
equation:
y = a(1+r)ᵗ

where:
a = initial amount r = is the percent
l + r = growth factor increased expressed as decimal
Exponential Growth Models
• A real-life application of exponential growth
occurs in the computation of compound
interest. The formula for the compound interest
is:  r
nt

1  
A=P  n
where:
A = compound amount t = time in years
P = principal n = period per year
r = interest rate
Example 4
Ellaine invested ₱50,000.00 at an annual rate of
6% compound yearly. Find the total amount in
the account after 10 years if no withdrawals and
no additional deposits are made.
Solution to Example 4
Use the compound interest formula with P =
₱50,000.00, r = 0.06, n = 1, and t = 10.
nt
A = P 1  r 
 n 1.10
 0.06 
= 50,000 1  
 1 
= 50,000 (1.06)¹⁰
= 89 542.38
There would be ₱89 542.38 in the account at the
end of 10 years.
Example 5
Determine the amount of money that will be
accumulated if a principal of ₱100,000 is
invested at an annual rate of 8% compounded:

a. yearly for 10 years

b. semi-annually for 10 years
c. monthly for 10 years
Solution to Example 5
a. Use the compound interest formula with
P = ₱50 000, r = 0.06, n = 1, and t = 10.
1.10

A = 100 000 1  0.08 

 1 
= 100 000 (1.08) ¹⁰
= 215 892.50

There would be ₱215 892.50 after 10 years

Solution to Example 5
b. Use the compound interest formula with P, r,
and t the same as in (a) and n=2.
2.10
 0.08 
A = 100 0001  2 
 
= 100 000 (1.04)²⁰
= 219 112.31

There would be ₱219 112.31 after 10 years

Solution to Example 5
c. Given: P = 100 000, r = 0.08, n = 12, and t = 10.
Substituting these values in the formula, we
have 12.10
 0.08 
A = 100 000 1  12 
 
= 100 000 (1.007)¹²⁰
= 230 959.84

There would be ₱230 959.84 after 10 years

 When the principal P in pesos is invested at
an annual interest rate r (in percent),
compounded continuously, the amount A
accumulated after t years is given by the
formula:
A =Peʳᵗ
Example 6
Determine the amount of money that will be
accumulated if a principal of ₱100,000 is
invested at an annual rate of 8% compounded
continuously after 10 years if no withdrawal are
made.
 Solution to Example 5
Apply the continuous compound formula with P = 100
000, r = 0.08, and t = 10.
A = Peʳᵗ
A = 100 000
e 0.08(10)
A = 100 000 0.08
e
A = 100 000 (2.2255409)
A = 222 554.09
There will be ₱222 554.09 in the account after 10 years.
Decay Factor
The ratio new value is called the decay factor
original value
associated with the specified percent decrease.

The decay factor is formed by subtracting the

specified decrease from 100% and then
changing this percent to its decimal form.