A handy differentiation rule combines the natural log with the chain rule: d/dx [ln g(x)] = g’(x)/g(x). In words, the first derivative of the natural log of a function returns the growth rate in percentage terms. Here I illustrate with a continuous compounding example, where terminal wealth, W(y), is achieved by the continuous compounding at rate of (i) over (y) years:

Comments

1. Thanx from HEC Montréal 30 Jan 2010

   Good work!

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