Valuation of a Floored Floater

Interest rates drop near zero and stay there. A floored floater with a 4% floor would have to be priced at:

Not quite. This would be the case if the floor weren't binding and had no chance of becoming binding.

That's it! The fact that the price floor is binding just highlights the fact that the price of the bond deserves to be at a premium, and it would continue to trade at a premium.

No. This is merely a series of guaranteed minimum cash flows. This would have a finite value as there's no division by zero or any reason to expect the bond's value to grow without bound.

par.

a premium.

an infinite level.