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Here's how i'd have at it; * I happen to know these are okay guesses. ** Let's assume it's just the potential energy, and that as the point of the "500 years" part of the question. The moon came from the earth - likely it's crust since the idea is that it was formed from an impact. The crust of the earth is less dense than the core, so the moon is less ...


3

Another take on the question which uses stochastic calculus [Digression] Assume deterministic and constant rates without loss of generality. Also assume the absence of arbitrage opportunities and market completeness Let $B_t$ denote the time-$t$ value of a risk-free money market account in which 1 unit of currency $C$ has been invested at $t=0$: ...


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Let $\tau = T-t$. Then \begin{align*} S_T = S_t e^{(\mu - \frac{1}{2}\sigma^2) \tau + \sigma \sqrt{\tau}\, Z}, \end{align*} where $Z$ is a standard normal random variable, independent of $\mathcal{F}_t$. Moreover, \begin{align*} E\left(S_T 1_{\{S_T >K\}}\mid \mathcal{F}_t \right) &= E\left(S_t e^{(\mu - \frac{1}{2}\sigma^2) \tau + \sigma \sqrt{\tau}\, ...



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