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Exercises MEF - 5 - 2018

The document contains exercises on calculus topics like limits, continuity, Taylor series approximations, and partial derivatives. There are 8 exercises involving functions of one or more variables and applying calculus concepts like limits, derivatives, and Taylor approximations.

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35 views2 pages

Exercises MEF - 5 - 2018

The document contains exercises on calculus topics like limits, continuity, Taylor series approximations, and partial derivatives. There are 8 exercises involving functions of one or more variables and applying calculus concepts like limits, derivatives, and Taylor approximations.

Uploaded by

rtchuidjangnana
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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Exercise Session 5, 23 October 2018

Mathematics for Economics and Finance


Prof: Norman Schürhoff
TAs: Jakub Hajda, Jimmy Lerch

Exercise 1
Calculate the limit of the following functions for x → ∞.

(a) f (x) = x ln 1 + xr .


x
(b) g (x) = 1 + xr .

Exercise 2
a) Let f, g be two continuous functions on [a, b] ⊂ R and let x0 ∈ (a, b) with f (x0 ) = g(x0 ). We then define
(
f (x) if x ∈ [a, x0 ),
h(x) =
g(x) if x ∈ [x0 , b].

Verify that h is continuous on [a, b].


b) Verify that h is continuous on R, where h is given by

1 if x ∈ (−∞, −1),

h(x) = x2 if x ∈ [−1, 2),

x + 2 if x ∈ [2, ∞).

Exercise 3
Given is a function sin(x)

(a) Use Taylor series representation to represent sin(x) as an infinite sum.

(b) Use a second order Taylor approximation to approximate sin(0.1) around 0. Compute the approximation
error.

Exercise 4
Consider the function f (x) = ln(x2 + x − 1). Compute the exact value of f at x = 1.1 and compare it to the
third-order Taylor approximation in the neighborhood of x = 1. What is the order of the approximation error?

1
Exercise 5
Given is a variable x ∈ R which takes the value xt at time t (e.g. GDP). The expression
xt − xt−1
γ=
xt−1
is the growth rate at time t.
(a) Show that the growth rate γ can be approximated by 4ln(xt ) = ln(xt ) − ln(xt−1 ). (Hint: Use first order
Taylor approximation around xt−1 )
(b) Find the expression for the approximation error of the first order Taylor approximation.
(c) Argue using the results from b) why the first order Taylor approximation of γ is better if 4xt → 0.

Exercise 6
The price of a zero-coupon bond with face value F and maturity T as a function of the interest rate r is given by
F
P (r) = .
(1 + r)T
We are interested in examining the behavior of the bond price when the interest rate changes from its initial value
r0 to r1 = r0 + ∆r.
(a) Compute the first- and second-order derivatives of P (r). How would you interpret these derivatives (that
is, consider their signs and effects)?
(b) State the Taylor’s theorem for P (r1 ). Compute the first- and second-order approximation of P (r) at r1 .
What happens to the second-order term in the Taylor’s expansion when ∆r is close to 0?
(c) Prove that the actual bond price P (r1 ) is always larger than its first-oder approximation when ∆r is greater
than 0. What does your result imply for approximating bond prices using Taylor’s expansion? Hint: consider
the sign of the second-order term.

Exercise 7
Assume
1
(x2 + y 2 ) sin x2 +y x2 + y 2 =

2, 6 0,
f (x, y) =
0, x2 + y 2 = 0,
(a) Show that all first-order partials exist, and check whether they are continuous.
(b) Check whether the above function is differentiable at (0, 0).

Exercise 8
Let f : R2 → R be
√ xy
(
if (x, y) 6= (0, 0),
f (x, y) = x +y 2
2
.
0 if (x, y) = (0, 0).
(a) Is f a continuous function?
(b) Is f a differentiable function?

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