An issuer in the eurozone wants to sell a three-year floating-rate note at par \ with an annual coupon based on the 12-month Euribor + 300 bps. Because the 12 month Euribor is currently at a historic low and the issuer wants to protect itself against a sudden increase in interest cost, the issuer’s advisers recommend increasing the credit spread to 320 bps and capping the coupon at 5.50%. Assuming an interest rate volatility of 8%, the advisers have constructed the following binomial interest rate tree:

The value of the capped floater is closest to:

A. 92.929.

B. 99.916.

C. 109.265.

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Year 0 0.5430% Year 1 2.0908% 1.7817% Year 2 2.6865% 2.2893% 1.9508%