Effective date-Terminology refers to which date

CFA Level III Derivatives
#1

AAA Bank bought an interest rate floor with a 1 year maturity and quarterly settlement payments on April 1, July 1, October 1, and next year January 1

For calculating the effective interest on July 1 the Libor and floor pertaining to 1 April is used.

The way I understand it is the interest rate is known on 1 April and start recognising (booking income/expense) from this date.

So July 1 is the settlement date but it is being termed as effective date.

Kindly help, I am confused.

#2

bought floor on 1st April - and floor starts to pay off on 1 Jul, 1 Oct, 1 Jan future periods.

floor expires on 1st Jul. you calculate the effective rate when the floor pays off - so that is on Jul 1st.

#3

So effective date/settlement date are same here as it is the actual pay-off date.