Question: Can you explain more about the question(B)? Question 4: J.P. Morgan sells a 3 against 12 FRA for $1m at an annualized rate of 4.75%.

Can you explain more about the question(B)?

Can you explain more about the question(B)? Question 4: J.P. Morgan sells

Question 4: J.P. Morgan sells a "3 against 12" FRA for $1m at an annualized rate of 4.75%. Three months after the sale, interest rates have the following term structure: maturity (# months) rate(%) 3 4 4.5 5 12 5.5 a. How much cash does the bank pay to, or receive from, the FRA buyer? b. What is J.P. Morgan's effective lending rate for the 270-day lending period

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