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

question 3

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.How much compensation does the dealer receive for transaction costs,credit risk and other costs associated with matching the FRA's?

• A) $31,250
• B) $21,350
• C) $41,000
• D) $48,150
• E) None of the above

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Definitions:

Low Wages

Compensation for work that is perceived to be significantly below what is considered adequate for the cost of living in a society.

False Claims

Assertions or statements made that are not true, often used in legal contexts to denote fraudulent or misleading information.

Advertisements

A form of marketing communication used to promote or sell a product, service, or idea.

Major Organic Product

The principal substance formed from an organic chemical reaction, often emphasized in contexts where multiple products are possible but one predominates.