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:

Public Transportation

A system of vehicular services including buses, trains, and subways, available to the public for commuting and traveling within and between urban areas.

Cultural Adaptation

The process of adjusting and acclimating to a new culture when living in it.

Disintegration

The process of breaking down into smaller parts or elements, leading to the loss of cohesion or unity.

Nervousness

A feeling of anxiety, unease, or apprehension often experienced before an important event or in uncertain situations.