Exhibit 23.2 Use the Information Below for the Following Problem(S)

question 48

Multiple Choice

Exhibit 23.2
Use the Information Below for the Following Problem(S)
Darden Industries has decided to borrow $25,000,000.00 for six months in two three-month issues. As the Treasurer, you are concerned that interest rates will rise over the next three months and the rate upon which the second payment will be based will be undesirable. (The amount of Darden's first payment will be known at origination.) To reduce the company's interest rate exposure, you decide to purchase a 3 × 6 FRA whereby you pay the dealer's quoted fixed rate of 4.5% in exchange for receiving 3-month LIBOR at the settlement date. In order to hedge her exposure, the dealer buys LIBOR from McIntire Industries at its bid rate of 4%. (Assume a notional principal of $25,000,000.00 and that there are 60 days between month 3 and month 6.)
-Refer to Exhibit 23.2.Assuming that 3-month LIBOR is 5.00% on the rate determination day,and the contract specified settlement in advance,describe the transaction that occurs between the dealer and Darden.

• A) The dealer is obligated to pay Darden $30,864.20.
• B) The dealer is obligated to pay Darden $19,359.61.
• C) Darden is obligated to pay the dealer $19,359.61.
• D) Darden is obligated to pay the dealer $30,864.20.
• E) None of the above

---

Definitions:

Statistical Analysis

The process of collecting, reviewing, interpreting, and presenting data to discover underlying patterns and trends.

Literature Review

A written summary and evaluation of the existing literature on a specific topic.

Variables

Elements or factors that can change and potentially affect the outcomes of a study or experiment.

Pilot Study

A preliminary study conducted to evaluate feasibility, time, cost, risk, and adverse events involved in a full-scale research project.