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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 ?
If you have a terrible toothache and can't get to a dentist right away, put a capful of 3% peroxide into your mouth and hold it for 10 minutes several times a day.
I prostrated myself to my Maker, thanking him for the gas-guzzling V12s, V10s, V8s, V6s and in- line sixes that I'd driven, while I dreaded the day that I'd be filing reports on people carriers that would achieve inter- galactic mileage on one nano-litre of New World Shell Ultra Green, yours for pounds 50 an egg- capful, er, that's the standard Euro-oeuf-tasse, as dictated by our, masters in Brussels, God bless `em.
99 Ease of use: Simply shakethe bottle to mix the liquid and swill a capful around your mouth.
She makes a crystallised compound and recommends a capful into a sink of water before washing to ensure that the water doesn't strip the skin's natural acid mantle.
A capful of methanol - a fuel more volatile than gasoline - was added to the ``launcher,'' a small hole poked near the bottom and a tennis ball wedged in the top.
She said that Miss Murphy drank a capful of the clear liquid and passed it to her.
A capful of methanol - a fuel more volatile than gasoline - was added to the ``launcher'' with a small hole poked near the bottom and a tennis ball wedged in the top.
One small capful gets your whole wash clean without having to buy an extra pre-treater product.
Wash hair every day, massaging the scalp to boost circulation, and finish by rinsing through a capful of vodka - it's astringent, so will ease the oil problem.
Already sold in some sex shops as an aphrodisiac, GHB costs about pounds 5 for a capful.
Along with penicillin, each calf got one capful of liquid sulfa (from farm supply stores).
Highly soluble, GHB is sold in liquid form by the capful for $5 to $25 a cap and often added to water or alcohol.