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Find the floor rate in a3-year zero cost collar, assuming current rates are6.5%and they will go up or down by1.7% each year with equal probability.
Find the floor rate in a3-year zero cost collar, assuming current rates are6.5%and they will go up or down by1.7% each year with equal probability. Assume the cap rate is7.7%. Provide your answer in % rounded to2decimal places.(In this question, we assume that a3year caps and floors will make their last payment at the end of year3, based on the rates in effect at the start of year3.)
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