Question: Please, answer the below question with showing the entire steps very clearly. Interest Rate Floor: A money manager has purchased a floating rate bond offering

Please, answer the below question with showing the entire steps very clearly.

Interest Rate Floor: A money manager has purchased a floating rate bond offering LIBOR+3% The money manager fears a fall in interest rates and thereby buys a floor of 5% at a premium of 3% over a 3-year time horizon. Complete the table below End of year The floating rate bond pays Net received By money Floor Premium LIBOR at year-end manager 1 4% 2 2% 3 1% Show the details of components of net received by money manager Year end 1 2 3

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