WarrenB1

Apologies, i meant you're short the bond (floating rate payer). bpdulog example looks correct: if you are paying LIBOR (currently 7%), long the cap with a strike at 7% and short a floor with a strike of 7% and LIBOR goes to 10%, you pay 10% on the bond, and recieve 3% on the cap, total cost of 7%; if LIBOR goes to 2%, you pay 2% on the bond and pay 5% on the floor, total cost of 7%, hence a fixed-rate position.