University Of Ghana, Department Of Eco nomics

Econs 305: Applied Mathematics For Economist

Instructor: Dr. D. K. Twerefou
Problem Set 1: Exponential and Logarithmic function

1. Using the relevant rule(s) of exponential functions compute the following:

3 1
416   102
14
b. 4 2
c.
 33  3
d.
52
a. 4

2. Solve the following using logarithms:

3
2 2 2  12 
a. x  (4)(5)(2) b. x  25  5 c. x  5  2 d. x   
 3(4) 

3. How quickly will a given investment triple if it is invested at an annual interest rate of 10%
per annum and interest is compounded a) annually and b) weekly.

4. Assume a population growth model of P (t )  P0 e0.04 t . How long will it take for the
population to double?

5. Calculate the balance at the end of 2 years if you deposit ¢100 in savings account with a
bank which compounds interest monthly at the rate of 10% per month.
4. Find the effective annual interest rate for a nominal interest rate of 5% per annum when
compounded for 20 years
i) Discretely ii) Continuously
5. Mr. Kofi Appiah wants to invest in one of two viable projects - A and B. The table below
shows the profits associated with the two projects over the life cycle of the project presented
by Kumi Associates, an investment firm in Accra. If the discount rate is 12%, calculate the
present value of each project and advice Mr Kofi Appiah which investment is more
profitable.

Period Profits (₵)

0 Project A Project B
1 2600 1800
2 1500 2000
3 800 2500
4 600 2800
5 - 3000

6. The government of Ghana introduced the student’s loan scheme in 1989. The basic aim of
the programme was to support students through University education and the amount paid to
students in that year is ¢500,000.
 (a) Assume that in the year 2000, students were paid an amount of ¢1,200,000.
Calculate the growth rate if it is assumed to be:
i) Discrete
ii) Continuous
(b) Using your results in (a) write down the general equation for the growth of students
loan in both cases
(c) How much will students receive in both cases in the year 2005

7. In order to convince policy maker that there is the need to generate more energy for local
consumption, Volta River Authority (VRA), the sole power producer in Ghana estimates that
energy demand will increase from 3,586 to 9,794 GWh over a ten-year period starting from
the year 2000.
a. Calculate the growth rate in Ghana’s energy demand if its:
i. continuous
ii. discrete
(correct all your answers to 4 decimal places)
b. Using your results in (a), write down the general equation for Ghana’s Energy demand in
both cases

c. Assume that the Energy Commission, charged with the responsibility of formulating
energy policies for Ghana estimates that the energy demand growth is discrete:

i. At what point in time will the country be required to generate 14,500 GWh of
energy.
ii. If the Ministry of Energy - the implementing agency of all energy programmes
estimate that the energy demand growth is continuous and uses this in its
projections, what will be the excess or shortfall in energy generated at that point in
time.