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