Answer:
C. $2,500
Explanation:
As we got a floor, this protects from a decrease in rate. In this case, we have a floor of 5% and the variable rate drop to 4% which is below the floor so the floor triggers:
We are asked for how much interest revenue were saved by the floor:
rate differences: floor - actual = 0.05 - 0.04 = 0.01
now we calcualte the interest as usual:
principal x rate x time = payoff
1,000,000 x 0.01 x 3/12 = 2,500
