Use the DerivaGem software to value a five-year collar that guarantees that the maximum and minimum interest

Question:

Use the DerivaGem software to value a five-year collar that guarantees that the maximum and minimum interest rates on a LIBOR-based loan (with quarterly resets) are 7% and 5% respectively. The LIBOR zero curve (continuously compounded) is currently flat at 6% and is used for discounting. The flat volatility is 20%. Assume that the principal is $100.