Refer to the Following Information

Refer to the following information. 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 x 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.)
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