Exhibit 23.10 Use the Information Below for the Following Problem(S)

question 6

Multiple Choice

Exhibit 23.10
Use the Information Below for the Following Problem(S)
TexMex Corporation has decided to borrow $50,000,000 for six months in two three-month issues. The corporation is concerned that interest rates will rise over the next three months. Thus, the corporation purchases a 3 × 6 FRA whereby the corporation pays the dealer's quoted fixed rate of 3.5% in exchange for receiving 3-month LIBOR at the settlement date. In order to hedge her exposure, the dealer buys LIBOR from Newport Inc. at its bid rate of 3%. The notional principal is $50,000,000 and that there are 60 days between month 3 and month 6.
-Refer to Exhibit 23.10.How much compensation does the dealer receive for transaction costs,credit risk and other costs associated with matching the FRA's?

• A) $42,700
• B) $62,500
• C) $82,000
• D) $96,300
• E) None of the above

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Definitions:

Enron Corporation

An American energy, commodities, and services company based in Houston, Texas, that became infamous for its bankruptcy in 2001 due to one of the largest corporate fraud scandals in history.

Accounting Services

Professional services offered by accountants, including audit, tax preparation, bookkeeping, and financial planning.

Attorney-Client Privilege

A legal principle that protects communications between a client and their attorney from being disclosed without the client's consent.

Revealed Without Permission

The unauthorized disclosure of confidential or private information.