Exhibit 14-5 USE THE FOLLOWING INFORMATION FOR THE NEXT PROBLEM(S)

question 56

Multiple Choice

Exhibit 14-5
USE THE FOLLOWING INFORMATION FOR THE NEXT 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 14-5. Assuming that 3-month LIBOR is 5.00% on the rate determination day, and the contract specified settlement in arrears at month 6, describe the transaction that occurs between the dealer and Darden.

• A) The dealer is obligated to pay Darden $19,500
• B) The dealer is obligated to pay Darden $31,250
• C) Darden is obligated to pay the dealer $19,500
• D) Darden is obligated to pay the dealer $31,250
• E) None of the above

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Definitions:

Cross-Cultural Research

A scientific method of study that compares cultures to identify similarities and differences among them, often to understand universal vs. culture-specific phenomena.

Ideal Attachment

A strong emotional and psychological bonding between a child and their caregiver that is considered to have positive outcomes on the child's development.

Attachment

The emotional connection that develops between a child and their caregiver, significantly impacting the child's development and future relationships.

Attachment Behaviors

Actions by infants or young children to seek proximity or contact with a caregiver for comfort or security.