Exponential Models: In a civil case a large company has a judgement made against it.
The magistrate states
that the penay is $1 million, to be paid on July 01 2018 and the
fine increases by $10 million each day thereafter. The companys legal counsel insists
that the penay is unfair and arbitrary and hence they are not legally bound to pay the
fine until an appeal case is heard. The magistrate is very canny and in response to this
she decides to set aside her initial ruling and instead makes the following o¤er of a choice
of penaies, with the chosen penay to be legally binding once agreed to:
Penay A: $1 million dollars to be paid on July 01 2018 and the fine increases by $10 million
each day thereafter i.e. the original penay
Penay B: An initial amount of 1 cent, beginning on July 01 2018 and doubling thereafter,
with the fine payable to be the amount generated after 40 days of doubling
1. The company legal counsel is delighted and without recourse to a consuing mathematician, readily take the offer of Penay B, thinking that a penay of 1 cent cannot double sufficiently to be anywhere near Penay A.
(a) Which penay will be larger after the 40 days? Were the company counsel correct in taking the option of Penay B?
(b) Express as a formula, the amount Penay A as a function of time t , where t is the number of days after July 01 2018.
(c) Express as a formula, the amount Penay B as a function of time t , where t is the number of days after July 01 2018.
(d) Graph both A(t) and B(t) on the same set of axes.
(e) Algebraically determine the time, t such that the different penaies are equal and represent it on the graph for part (c).
(f) What would be the cost to the company if it declined to pay the penay for a full year?