To value the floored floater, we work backwards through the binomial tree:

Year 1:

• Upper node: Rate = 5.5%, coupon = 5.5%
• Lower node: Rate = 1.5%, but floor is 4%, so coupon = 4%

Year 0:

• Rate = 3.5%, coupon = 3.5%

Valuation:

• At Year 1 upper node: Value = (100 + 5.5) = 105.5
• At Year 1 lower node: Value = (100 + 4) = 104
• At Year 0: Value = [0.5 × (105.5/1.055) + 0.5 × (104/1.015)] + 3.5 = [0.5 × 100 + 0.5 × 102.46] + 3.5 = [50 + 51.23] + 3.5 = 101.23 + 3.5 = 104.73

Present value at Year 0: PV = 104.73 / 1.035 = 101.19

The floor increases the bond's value compared to an unfloored floater, which would be priced at par (100).