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An upper limit on the interest rate on a floating-rate note (FRN) or an adjustable-rate mortgage (ARM). Also, an OTC derivatives contract consisting of a series of European interest rate call options; used to protect an issuer of floating-rate debt from interest rate increases. Each individual call option within the cap is called a caplet. Opposite of a floor.


1. Informal for market capitalization.

2. In a floating-rate note or an adjustable-rate mortgage (ARM), the highest possible interest rate. For example, if one has an adjustable-rate mortgage on a house, the interest rate fluctuates periodically. However, if the homeowner has a cap on the interest rate, there is a guarantee that it will never rise above a certain percent, no matter what the ARM formula would otherwise dictate. A cap is designed to protect the person or company making the interest payments. See also: Floor, Collar.


1. An upper limit on the interest rate to be paid on a floating-rate note.


A cap is a ceiling, or the highest level to which something can go.

For example, an interest rate cap limits the amount by which an interest rate can be increased over a specific period of time. A typical cap on an adjustable rate mortgage (ARM) limits interest rate increases to two percentage points annually and six percentage points over the term of the loan.

In a different example, the cap on your annual contribution to an individual retirement account (IRA) is $4,000 for 2006 and 2007 and $5,000 in 2008, provided you have earned at least that much. If you're 50 or older, you can make an additional catch-up contribution of $1,000 each year.




A ceiling on the adjustments that can be made in the payments or interest rate of an adjustable-rate loan.


Same as Float-Down.

References in periodicals archive ?
Asimismo en el INAP tenemos que trascender y convertimos en una entidad mas fuerte, mas determinante de nuestro devenir administrativo publico.
For his part, Ibarra emphasized the importance of having an INAP "aggiornado to the times, with all the technology" because it constitutes "a fundamental and key link to transform the State".
Support services for the recruitment, selection processes corresponding managed by the INAP, consisting of data collection and updates of files, correction protocols listed review and development and design, printing and distribution of test protocols printing and distribution of questionnaires and collection and delivery of exercises.
En tanto, el presidente del INAP, Adolfo Lugo Verduzco, senalo que el presidente Ernesto Zedillo demuestra la trascendencia de un servicio publico profesional, de una administracion honrada y transparente, y de una participacion social creciente y corresponsable ante la urgencia de instrumentar proceso de cambio orientados al fortalecimiento de las instituciones.
Computer-related services to support the infrastructure of micro computer systems and INAP.
Held at the National Nutrition Agency (NaNA), the forum, was supported by the Food and Agricultural Organisation (FAO) of the United Nations in their bid to harmonise the National Emergency Preparedness and Response Plan for Avian Influenza, also called the INAP, with the proposed Regional Contingency Plan for West Africa.