Cap

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Cap

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.

Cap

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.

cap

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

Cap.

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.

CAP

see COMMON AGRICULTURAL POLICY.

cap

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

Cap

Same as Float-Down.

References in classic literature ?
The capadors teased the bull their capes, and when it charged them they ran toward the horse and into their shelters.
The capador stepped to the side, with a twirl of the cape eluding the bull and spreading the cape on his own shoulders.
Again the capadore eluded him, throwing the cape on his shoulders, and again the audience applauded.
It will, therefore, be readily understood that Archibald's inability to do a hole in single figures did not handicap him at Cape Pleasant as it might have done at St.
By the way, her family have taken a cottage at Cape Pleasant for the summer.
It is not to be wondered at, therefore, that Archibald's remark about his fiancee coming to live at Cape Pleasant should give him food for thought.
Bits of surf-harried beach clove the worn granite, or whatever the rocks of Cape Farewell may be composed of, and as I followed the ebbing tide down one of these soft stretches, I saw the thing.
There he found that he would have a two days' wait before he could catch a ship bound for Cape Town.
When the Beagle was at Cape Town, I made an excursion of some days' length into the country, which at least was sufficient to render that which I had read more fully intelligible.
Besides these large animals, every one the least acquainted with the natural history of the Cape, has read of the herds of antelopes, which can be compared only with the flocks of migratory birds.
My design in this was to make the river Gambia or Senegal, that is to say anywhere about the Cape de Verde, where I was in hopes to meet with some European ship; and if I did not, I knew not what course I had to take, but to seek for the islands, or perish there among the negroes.
At length, doubling the point, at about two leagues from the land, I saw plainly land on the other side, to seaward; then I concluded, as it was most certain indeed, that this was the Cape de Verde, and those the islands called, from thence, Cape de Verde Islands.