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Mathematical Foundations for Quant Finance
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Level 1, Precalculus 1.4 Exponents and logarithms Lesson 1 of 7

ConceptLesson 1.4.1 in Level 1, Precalculus. About 25 minutes.

Exponents and their rules

What an exponent means

An exponent counts how many copies of a number are multiplied together. In 252^5 the base is 2 and the exponent is 5:

25=2×2×2×2×2=322^5 = 2 \times 2 \times 2 \times 2 \times 2 = 32

Read 252^5 as "2 to the power 5", or "2 to the fifth". A power of 1 is the number itself: 71=77^1 = 7.

The exponent is a count, so it has no units. If the base has units, they are raised too: a square with sides of 3 cm has an area of (3 cm)2=9 cm2(3\text{ cm})^2 = 9\text{ cm}^2.

Try it

Python writes a power with two stars: 2 ** 5.

Run the cell, then change a number and run it again. The middle line is what you get when something grows by 50% three times in a row: 1.5×1.5×1.51.5 \times 1.5 \times 1.5.

⌘/Ctrl + Enter runs the cell

Multiplying and dividing powers

Write the factors out and count them:

23×22=(2×2×2)×(2×2)=252^3 \times 2^2 = (2 \times 2 \times 2) \times (2 \times 2) = 2^5

Three factors and two more make five. The same counting works for any base.

Rule: Product rule

am⋅an=am+na^m \cdot a^n = a^{m+n}

When you multiply two powers of the same base, add the exponents.

Dividing cancels factors instead. Two of the threes on top cancel the two below:

3532=3×3×3×3×33×3=33\frac{3^5}{3^2} = \frac{3 \times 3 \times 3 \times 3 \times 3}{3 \times 3} = 3^3

Rule: Quotient rule

aman=am−n\dfrac{a^m}{a^n} = a^{m-n}

When you divide two powers of the same base, subtract the bottom exponent from the top one.

Try it

Check both rules with numbers. Each line prints two values that should match.

Division in Python always gives a decimal, which is why one value shows as 27.0.

⌘/Ctrl + Enter runs the cell

Powers of powers, products and quotients

Squaring 232^3 means writing it twice. Then the product rule adds the exponents:

(23)2=23×23=23+3=26(2^3)^2 = 2^3 \times 2^3 = 2^{3+3} = 2^6

Two copies of three factors is six factors, so the exponents multiply.

Rule: Power of a power

(am)n=amn(a^m)^n = a^{mn}

Raising a power to another power multiplies the exponents.

Rule: Power of a product or quotient

(ab)n=anbn(ab)n=anbn\begin{gathered} (ab)^n = a^n b^n \\ \left(\dfrac{a}{b}\right)^n = \dfrac{a^n}{b^n} \end{gathered}

A power outside brackets applies to every factor inside them. Read backwards, it joins different bases that share an exponent: 23×33=632^3 \times 3^3 = 6^3.

Try it

Here are the rules with numbers. For example (2×5)3=103(2 \times 5)^3 = 10^3, and 23×53=8×1252^3 \times 5^3 = 8 \times 125; both are 1000.

The last line joins two bases: 23×332^3 \times 3^3 and 636^3 are both 216.

⌘/Ctrl + Enter runs the cell

A worked simplification

Most simplifications use several rules in a row. Here is (2x3)2⋅x44x5\dfrac{(2x^3)^2 \cdot x^4}{4x^5}, one rule at a time:

(2x3)2⋅x44x5=4x6⋅x44x5=4x104x5=x5\begin{aligned} \frac{(2x^3)^2 \cdot x^4}{4x^5} &= \frac{4x^6 \cdot x^4}{4x^5} \\[4pt] &= \frac{4x^{10}}{4x^5} \\[4pt] &= x^5 \end{aligned}

The first line squares each factor in the bracket: 22=42^2 = 4, and (x3)2=x6(x^3)^2 = x^6 by the power of a power. The second adds exponents by the product rule. The third cancels the 4s and subtracts exponents by the quotient rule.

Try it

Put numbers in for xx and both sides must agree. One value could agree by luck, so the cell tries two.

round(…, 6) hides tiny rounding errors in the last digits.

⌘/Ctrl + Enter runs the cell

Zero and negative exponents

Watch what happens as the exponent goes down by one. Each step divides by 2:

232^3222^2212^1202^02−12^{-1}2−22^{-2}
842112\tfrac{1}{2}14\tfrac{1}{4}

Keep the pattern going past 212^1 and you reach 20=12^0 = 1, then fractions. They get smaller at every step, but halving never reaches 0.

The powers of 2 from 2−32^{-3} to 242^4. Each step up in the exponent doubles the bar; each step down halves it, so negative exponents give values between 0 and 1.

The quotient rule gives the same answers. 2323\frac{2^3}{2^3} is 1, and the rule says it is 23−3=202^{3-3} = 2^0. Likewise 2225=432=18\frac{2^2}{2^5} = \frac{4}{32} = \frac{1}{8}, and the rule says it is 22−5=2−32^{2-5} = 2^{-3}.

Rule: Zero and negative exponents

a0=1a−n=1an(a≠0)a^0 = 1 \qquad a^{-n} = \dfrac{1}{a^n} \qquad (a \neq 0)

Any nonzero number to the power 0 is 1. A negative exponent means "one over": it does not make the number negative.

So 5−1=15=0.25^{-1} = \frac{1}{5} = 0.2, the reciprocal. A negative power of a fraction flips it: (23)−2=(32)2=94\left(\tfrac{2}{3}\right)^{-2} = \left(\tfrac{3}{2}\right)^2 = \tfrac{9}{4}.

Try it

The loop counts the exponent down from 3 to −3 and prints each power of 2.

Notice every power is positive, even when the exponent is negative.

⌘/Ctrl + Enter runs the cell

A base of zero

0n=00^n = 0 for any positive whole number nn, because a product of zeros is zero. A negative power of 0 would mean 10\frac{1}{0}, which does not exist. So 0−10^{-1} has no value.

000^0 is the one clash. The powers 01,02,030^1, 0^2, 0^3 suggest 0, while a0=1a^0 = 1 suggests 1. Algebra and Python take 00=10^0 = 1, but in calculus a limit of that shape is not always 1.

Try it

Python agrees with each case. 0 ** -1 stops with a ZeroDivisionError, which the cell catches and reports.

⌘/Ctrl + Enter runs the cell

Negative bases

A negative base is fine with a whole-number exponent. Each extra factor of −2-2 flips the sign:

(−2)1(-2)^1(−2)2(-2)^2(−2)3(-2)^3(−2)4(-2)^4(−2)5(-2)^5
−2-24−8-816−32-32

An even exponent gives a positive answer; an odd one keeps the minus sign. The brackets matter. (−2)2=4(-2)^2 = 4, but −22-2^2 means −(22)=−4-(2^2) = -4, because powers come before the minus sign (lesson 0.3.1).

Try it

Python follows the same order: -2**2 squares first, then applies the minus.

⌘/Ctrl + Enter runs the cell

Fractional exponents

What should 91/29^{1/2} mean? Square it and use the power-of-a-power rule:

(91/2)2=912×2=91=9\left(9^{1/2}\right)^2 = 9^{\frac{1}{2} \times 2} = 9^1 = 9

So 91/29^{1/2} is the number whose square is 9. That is 3, the square root of 9.

Rule: Fractional exponents

a1/n=anam/n=(an)mfor a>0\begin{gathered} a^{1/n} = \sqrt[n]{a} \\ a^{m/n} = \left(\sqrt[n]{a}\right)^m \\ \text{for } a > 0 \end{gathered}

The bottom of the fraction is a root. The top is an ordinary power. Take the root first and the numbers stay small: 82/3=(83)2=22=48^{2/3} = (\sqrt[3]{8})^2 = 2^2 = 4.

A negative fractional exponent combines the two ideas: root, power, then one over. So 8−2/3=182/3=148^{-2/3} = \frac{1}{8^{2/3}} = \frac{1}{4}.

Any decimal exponent works for a positive base: 100.5=10≈3.162310^{0.5} = \sqrt{10} \approx 3.1623. Lesson 1.4.2 uses this to let the exponent be any number at all.

Try it

Python handles fractional exponents directly.

The third line prints 3.9999999999999996, not 4. A computer stores 23\tfrac{2}{3} with a tiny rounding error, and the error shows in the final digit. That is normal; round when you display results.

⌘/Ctrl + Enter runs the cell

Why the base must be positive

No real number squares to −4-4, so (−4)1/2(-4)^{1/2} has no real value. That is why lesson 1.1.1 left negative inputs out of the domain of x\sqrt{x}. Every even root of a negative number fails the same way.

Odd roots of negatives do exist: (−2)3=−8(-2)^3 = -8, so the cube root of −8-8 is −2-2. But (−8)2/3(-8)^{2/3} is unsafe, because 23\frac{2}{3} is also 46\frac{4}{6}, which asks for an even root. So the rule keeps to a>0a > 0.

Try it

Python shows the trap. (-8) ** (1/3) does not print −2. It switches to complex numbers (lesson 1.7.2), marked by the j, and returns a different cube root.

For the real cube root, use np.cbrt.

⌘/Ctrl + Enter runs the cell

Common mistakes

Try it

  1. Exponents do not split over addition. (3+4)2(3 + 4)^2 is 49, but 32+423^2 + 4^2 is 25.
  2. The product rule is for multiplication only. 23+242^3 + 2^4 is 24, not 27=1282^7 = 128.
  3. The bases must match. 23×322^3 \times 3^2 cannot be combined into one power.
  4. The power comes before the minus sign. −22=−4-2^2 = -4. To square −2-2, write (−2)2=4(-2)^2 = 4.
  5. A negative exponent is not a negative number. 2−3=0.1252^{-3} = 0.125, not −8-8.
  6. An exponent is not a multiplier. 23=82^3 = 8, not 6, and x1/2x^{1/2} is x\sqrt{x}, not x2\frac{x}{2}.
  7. Fractional powers need a positive base. (−4)1/2(-4)^{1/2} has no real value.

The cell shows mistakes 1, 2, 4 and 5, one per line.

⌘/Ctrl + Enter runs the cell

Exponent rules

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How to type answers
  • Powers with ^: x^7, 2^(1/3), a^-2.
  • Multiply with * or by writing side by side: 3x^2, 2(x+1).
  • ln(x) is the natural log, log(x, 2) is log base 2, e is Euler's number, sqrt(x) is a square root.
  • sin(x), cos(x) and tan(x) take radians; write pi for π and sin(x)^2 for sin²x.
  • Your first answer to each question is saved: it counts towards your score and brings the question back for review.
  • Exact answers like ln(20)/ln(3) are best. Decimals need about 4 significant figures.

Summary card

  • ana^n multiplies aa by itself nn times. In Python, a ** n, never a ^ n.
  • Product and quotient rules: aman=am+na^m a^n = a^{m+n} and am/an=am−na^m / a^n = a^{m-n}.
  • Powers of powers multiply: (am)n=amn(a^m)^n = a^{mn}. A power applies to every factor in brackets: (ab)n=anbn(ab)^n = a^n b^n.
  • a0=1a^0 = 1 and a−n=1/ana^{-n} = 1/a^n for a≠0a \neq 0. 0−10^{-1} has no value; 000^0 is taken as 1.
  • am/n=(an)ma^{m/n} = (\sqrt[n]{a})^m for a>0a > 0. Even roots of negative numbers have no real value.
  • A negative base with a whole exponent: even gives a positive answer, odd a negative one. −22=−4-2^2 = -4, but (−2)2=4(-2)^2 = 4.
  • Exponents do not split over addition: (a+b)n≠an+bn(a + b)^n \neq a^n + b^n.

Free further reading

Optional. This lesson covers what you need; these add more examples and practice. All are free to read.

  • Integer Exponents

    Paul's Online Notes. Notes.

    Every exponent rule with many small worked examples, including the common mistakes.

  • Rational Exponents

    Paul's Online Notes. Notes.

    What fractional powers mean and how they connect to roots.

  • Exponent properties review

    Khan Academy. Interactive.

    A one-page summary of the exponent rules with links to practice.