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8. Option Pricing Suppose a certain stock currently sells for $30 per share. If a put option and a call option are available with $30 exercise prices, which do you think will sell for more, the put or the call? Explain.

9. Option Price and Internet Rates Suppose the interest rate on T-bills suddenly and unexpectedly rises. All other things being the same, what is the impact on call option values? On put option values?

10. Contingent Liabilities When you take out an ordinary student loan, it is usually the case that whoever holds that loan is given a guarantee by the U.S. government, meaning that the government will make up any payments you skip. This is just one example of the many loan guarantees made by the U.S. government. Such guarantees don't show up in calculations of government spending or in official deficit figures. Why not? Should they show up?

11. Option to Abandon What is the option to abandon? Explain why we underestimate NPV if we ignore this option.

12. Option to Expand What is the option to expand? Explain why we underestimate NPV if we ignore this option.

13. Capital Budgeting Options In Chapter 10, we discussed GM's launch of its new Cadillac Escalade. Suppose sales of the new Cadillac go extremely well and GM is forced to expand output to meet demand. GM's action in this case would be an example of exploiting what kind of option?

14. Option to Suspend Natural resource extraction facilities (e.g., oil wells or gold mines) provide a good example of the value of the option to suspend operations. Why?

15. Employee Stock Options You own stock in the Hendrix Guitar Company. The company has implemented a plan to award employee stock options. As a shareholder, does the plan benefit you? If so, what are the benefits?

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