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:

Social Cognition

An examination of the ways in which people interpret, keep, and use data about other individuals and social scenarios.

Power of The Situation

The influence that environmental or situational factors have on individuals' behavior, often underestimating personal dispositional factors.

Extraverted People

Individuals characterized by their outgoing, energetic, and social nature, often feeling energized by social interaction.

Stable Identity

A consistent and enduring sense of self that persists over time and across different situations.