Lecture 3 - More applications of differential equations

In this lecture, we will explore applications of differential equations in banking and electrical circuits.
Problem: Victoria deposits $10,000 into a bank account that pays interest at the rate of 4% a year. How
much money will Victoria have in her account after one year?
There is information missing from this problem! What is missing?
Well, we need to know how often the rate is compounded.
Let us consider how different compounding processes affect the amount of interest the account earns.
Example: Rate is compounded every year.
After 1 year: 10, 000 + 10, 000 · 0.04 = $10, 400
Example: Rate is compounded every 6 months: 2% after 6 month and 2% again after full year.
After 6 months: 10, 000 + 10, 000 · 0.02 = $10, 200
After 1 year: 10, 200 + 10, 200 · 0.02 = $10, 404
Example: Rate is compounded every 3 months.
After 3 months: 10, 000 + 10, 000 · 0.01 = $10, 100
After 6 months: 10, 100 + 10, 100 · 0.01 = $10, 201
After 9 months: 10, 201 + 10, 201 · 0.01 = $10, 303.01
After 1 year: 10, 303.01 + 10, 303.01 · 0.01 = $10, 406.04
Example: Rate is compounded every month.
Instead of doing 12 computations, we will derive a general formula!
Rate: r = 0.04
Initial amount: S0 = 10, 000
After 1 month: S1 = S0 + S0 · r/12 = S0 (1 + r/12)
After 2 months: S2 = S1 + S1 · r/12 = S1 (1 + r/12) = S0 (1 + r/12)(1 + r/12) = S0 (1 + r/12)2
..
.
After 1 year: S0 (1 + r/12)12 = 10, 000(1 + 0.04/12)12 = $10, 407.42
Can we guess what happens after 2 years?
S0 (1 + r/12)24
Here is the general formula!
If the interest is compounded m times a year, the amount of money S(t) after t years is:

S(t) = S0 (1 + r/m)mt

If you are compounding the rate m times a year, you are doing it discretely. So what happens if the rate
is compounded continuously?
S(t) = limm→∞ S0 (1 + r/m)mt ?
The variable for this limit is m and the remaining quantities (S0 , r, t) are all constant!
We can use techniques from Calculus to find the limit.
Step 1: Apply ln to both sides of the equation and simplify.
S(t) = S0 limm→∞ (1 + r/m)mt (since S0 is a constant)
S(t)
S = limm→∞ (1 + r/m)mt
0 
S(t)
ln S = limm→∞ ln((1 + r/m)mt ) = limm→∞ mt ln(1 + r/m) = t limm→∞ m ln(1 + r/m)
0
Step 2: Reorganize the limit to apply L’Hopital Rule.
ln(1 + r/m)
limm→∞ m ln(1 + r/m) = limm→∞
m−1
Step 3: Apply L’Hopital Rule.   
1 −r
ln(1 + r/m) 1 + r/m m2 r
limm→∞ −1 = limm→∞ −1 = limm→∞ =r
m 1 + r/m
m2
1
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Step
 4:  Put everything back together.
S(t)
ln S = rt
0
Step 5: Apply e to both sides.
S(t) rt
S0 = e

S(t) = S0 ert

Example: Rate is compounded continuously.

After 1 year: S(1) = 10, 000 ∗ e0.04·1 = $10, 408.10

Using what we learned in the previous lecture about solving differential equations, we can obtain the
equation above much quicker!
The function S(t) satisfies the following differential equation and initial condition:

dS
= rS(t) dollars/year, S(0) = S0 .
dt

Let’s solve for S(t):

dS
dt = r
S(t)
dS
R dt R
dt = r dt
S(t)
ln |S(t)| + D = rt + C
ln |S(t)| = rt + E
eln |S(t)| = ert+E
S(t) = Gert
S(0) = Ge0 = S0
G = S0

S(t) = S0 ert

A simple electrical circuit can contain a battery powering a light bulb.

Electrons flow from the negatively charged to the positively charged end of the battery passing through the
filament at the center of the bulb. The material out of which the filament is made provides resistance to
the passage of the electrons. The friction produces heat causing the bulb to glow. The bulb is therefore
called a resistor. The differential between the positive and negative charge in the battery is called voltage
and is measured in units called volts (V ). The more volts the bigger the pressure on the electrons to move.
The current of electrons created by the movement is measured in units called amperes (A). The resistance
of a material (such as the filament in the bulb) is measured in units called ohms (Ω). Here is a typical
diagram for the circuit pictured above.
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The famous Ohm’s Law (named in honor of the scientist Georg Simon Ohm who discovered it) states:

V = RI

Ohm’s law states that current is proportional to resistance. The smaller the resistance the larger the
current and visa versa.
Another component of an electric circuit can be an inductor. An inductor typically consists of a tight coil
of wires. When current runs through a wire it creates a weak magnetic field. Closely positioned wire coils
act to amplify each others magnetic field to create a much more powerful field.

You would expect this circuit to work as follows. Since the current can go either through the coiled wire or
through the bulb, you would expect most of the current to go through the coiled wire because the wire
offers no resistance while the bulb offers resistance. So the bulb should glow very dimply. However that is
not what happens. When the switch is closed, the bulb initially glows very brightly and then dims. When
the switch is opened, the bulb again glows very brightly and then goes out. This behavior is explained by
the presence of an inductor. As the current begins to flow, it causes a magnetic field to develop around the
inductor. This increase in the magnetic field opposes further increase in the field and therefore resists the
flow of current by generating voltage in the opposite direction. Similarly when the current stops flowing,
the decrease in the magnetic field opposes further decrease by generating voltage in the opposite direction
and causing current to flow. So the magnetic field has a drastic affect on current flow only when the flow of
current changes drastically, that is when we close the switch and current starts to flow or when we open
the switch currents stops to flow. At the beginning the current increases drastically and so the changing
magnetic field creates a voltage to oppose it, sending most of the current on the easier path through the
bulb and causing it to glow brightly. As the flow stabilizes, the resistance offered by the voltage from the
inductor disappears and it becomes easier for the current to flow through the inductor, dimming the bulb.
Once the switch is opened, the current stops to flow, causing the inductor to create voltage in the opposite
direction and the current to flow again for a very short time through the bulb making it burn brightly. In
other words, the inductor acts as battery storage that charges itself as the current begins to flow and
releases the energy as the current ebbs. The material’s ability L (named in honor of the scientist Heinrich
Friedrich Emil Lenz) to store energy in a magnetic field is measured in units called henries (H) (named in
honor of the scientist Joseph Henry). The voltage created by the inductor is proportional to the changes in
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the current not the current itself! The quantity L is the proportionality constant.
dI
V =L
dt

If a circuit has both a resistor and an inductor the equation governing the relationship is:
dI
V (t) = L + RI(t)
dt
The quantities L and R are constant in many situations because they only depend on how the resistor and
the inductor are made.
Problem: In a circuit the resistance is 12 Ω and the inductance is 4 H. The battery gives a constant
voltage of 60 V and the switch is closed when t = 0, so the current starts with I(0) = 0.
(a) Find I(t).
(b) Find what happens to the current after a long time.
(c) Find the current after 1 s.
Solution:
(a) V (t) = L dI + RI(t)
dt
60 = 4 dI + 12I(t)
dt
dI = (60 − 12I(t))/4 = 15 − 3I(t)
dt
dI = −3I(t) + 15
dt
Using our usual techniques we obtain the solution:
I(t) = Ge−3t + 5
I(0) = G + 5 = 0
G = −5

I(t) = −5e−3t + 5
(b) limt→∞ 5e−3t + 5 = 5
(c) I(1) = 4.75A
So the current stabilizes relatively quickly!
Problem: Suppose that inductance and resistance remain as in the previous example but instead of a
battery, we use a generator that produces a variable voltage V (t) = 60 sin(30t) volts. Find I(t).
Solution:
V (t) = L dI + RI(t)
dt
60 sin(30t) = 4 dI + 12I(t)
dt
dI = (60 sin(30t) − 12I(t))/4 = 15 sin(30t) − 3I(t)
dt
But this equation no longer has the form y 0 = ay + b!
So we cannot solve it using the method we learned so far.
We will learn how to solve these kinds of equations in the next lecture!