• Contracts and loan agreements often include minimum interest rates.
  • The lower limit of the interest rate is different from the upper or upper limit of the interest rate.
  • There are three common interest rate derivative contracts, of which the floor is only one.
  • If the variable rate falls below the floor interest rate, the lower threshold is triggered and becomes the prevailing rate for the period.
  • The floating rate floor is designed to protect the lender by ensuring that the minimum interest rate can be collected every month, even if floating rates reach 0%.