Business I / Differential Equations
Practice question · Select all that apply

Which statements about x(t)=x0ertx(t) = x_0 e^{rt} are true?

Hints
  1. The doubling time depends on the rate alone.
  2. The starting amount cancels out of that calculation entirely.
Show the answer
  • B. Continuous compounding at rate rr yields more than simple annual rr
  • C. It solves x˙=rx\dot{x} = rx for any initial value x0x_0
  • D. With r<0r < 0 it decays toward zero without ever crossing it
Why

Doubling time ln2/r\ln 2/r is the exponential’s magic: independent of size. A million doubles as fast as a hundred, which is why compounding stories end so dramatically.

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