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What is the value of the floor? The following tree shows the possible paths of 1 year (APR, with s.a. compounding) interest rates on loans.

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What is the value of the floor?

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The following tree shows the possible paths of 1 year (APR, with s.a. compounding) interest rates on loans. (Assume that the probability of an up move equals the probability of a down moves equals 0.50). 0 0.5 1 1.5 2 2.5 3 5.93% 5.74% 5.55% 5.55% 5.36% 5.36% 5.17% 5.17% 5.17% 4.98% 4.98% 4.98% 4.79% 4.79% 4.79% 4.79% 4.6% 4.6% 4.6% 4.41% 4.41% 4.41% 4.22% 4.22% 4.03% 4.03% 3.84% 3.65% Consider a 1.5year floating rate note with a face value of $5,000,000 and semi-annual interest payments. if the loan has a 4.73% floor, what is the value of the floor? $

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