Exponentiation is another fundamental mathematical operation, which is readily available in R's base functionality.

In the context of finance, this operation plays a critical role in the computation of compound interest, which is pivotal for understanding the growth of loans or investments over time.

To exponentiate a number a to the power of n in R, the syntax is a^n. Interestingly, if you're familiar with Python, you might recognize the ** operator, which can also be used in R (a**n). Let’s take an example related to probability and combinatorics: to find out the number of possible outcomes when throwing three dice. In this case, we would calculate it as 6 (the number of outcomes for one die) raised to the power of 3.


Let’s say you invested $1000 at an annual interest rate of 13%. To calculate the total amount of money you would accumulate over a period of 4 years with compound interest, you would perform the following calculation: Compute the product of 1000 and 1.13 raised to the power of 4.

Everything was clear?

Section 1. Chapter 5
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