Anyone else having difficulty factoring in the option premiums on interest rate caplets/floorlets? On the two blue box examples on pages 448-451, I do not see how the option premium is factored into the effective interest calculation like it is for the standard single period options where it is deducted for the effective interest rate.

I know in the end-of-chapter summary it says it is paid at the beginning but do you think we need to know any calculations on how to factor that into the payoff? If so, please share how that is done.