Points to remember-

1. The stochastic process W = (Wt)t>= 0 denotes a standard Brownian motion.

5. 6. 7. The probability P(W > 0) = { for all t > 0. Suppose that the monthly payment on a $25,000 car loan with monthly compounded interest rate of 6% is $300. After the next payment is made, the balance on the loan will be $24,700. The mapping t HW+ is continuous but not differentiable. If XYZ stock has a current dividend of $10 per share, dividends are expected to grow at a rate of 3% per year forever, and the required rate of return on XYZ stock is 13%, then the current value of XYZ stock according to the Gordon model is $103. 8. 2. If Z is a random variable then E(2) denotes its expectation and Var(2) denotes its variance. If Y is another random variable, then Cov(Y,Z) denotes the covariance of Y and Z. If E is some event, then P(E) denotes its probability. 5. 6. 7. The probability P(W > 0) = { for all t > 0. Suppose that the monthly payment on a $25,000 car loan with monthly compounded interest rate of 6% is $300. After the next payment is made, the balance on the loan will be $24,700. The mapping t HW+ is continuous but not differentiable. If XYZ stock has a current dividend of $10 per share, dividends are expected to grow at a rate of 3% per year forever, and the required rate of return on XYZ stock is 13%, then the current value of XYZ stock according to the Gordon model is $103. 8. 2. If Z is a random variable then E(2) denotes its expectation and Var(2) denotes its variance. If Y is another random variable, then Cov(Y,Z) denotes the covariance of Y and Z. If E is some event, then P(E) denotes its probability