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:

Babbling

Referring to the developmental phase in infants, babbling is an essential precursor to language development, where infants experiment with making sounds, indicating early speech capability.

Schemes

Schemes are organized patterns of thought or behavior that individuals use to interpret and interact with the world around them, pivotal in the cognitive development theory of Jean Piaget.

Language Development

The process by which individuals acquire and refine the ability to understand and produce language.

Brain

The central organ of the human nervous system, located in the skull, responsible for processing sensory information, regulating bodily functions, and enabling cognition and emotions.