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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.
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.


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.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved


1. An upper limit on the interest rate to be paid on a floating-rate note.
Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.


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.

Dictionary of Financial Terms. Copyright © 2008 Lightbulb Press, Inc. All Rights Reserved.


Collins Dictionary of Economics, 4th ed. © C. Pass, B. Lowes, L. Davies 2005


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

The Complete Real Estate Encyclopedia by Denise L. Evans, JD & O. William Evans, JD. Copyright © 2007 by The McGraw-Hill Companies, Inc.


Same as Float-Down.

The Mortgage Encyclopedia. Copyright © 2004 by Jack Guttentag. Used with permission of The McGraw-Hill Companies, Inc.
References in periodicals archive ?
Another reason that cap marketing has been so successful is that it "ties into the daily wardrobe," VantHul says.
Providers are obligated to tell patients when they exceed the cap. It is then up to patients, providers, social workers, and/or whomever wants to take the lead in this to arrange for patients to receive continued Medicare-covered therapy in a hospital-based outpatient setting.
Accordingly, May 10 is observed in the area as Gilgit cap day.
Haider , a shopkeeper in main NLI market Gilgit said , 'Daily I sell more than fifty Gilgiti caps as most of the residents of Gilgit Baltistan prefer to buy local or Gilgiti caps to other caps, in addition to that many tourists from other parts of Pakistan and abroad purchase it, he added.
While Manzoor Pashteen (Pakhtun is pronounced as Pashteen in his Mehsud dialect) is said to have got his cap for the first time from a labourer in South Waziristan, those planning to attend the April 8 PTM gathering in Peshawar are asking around where to get the cap from and one activist in Peshawar, a lawyer by profession, has made arrangements to provide it though not free of charge.
* 825 Elm St, New Haven, CT; 43-unit multifamily traded for $3,870,000; a 4.2 percent cap on current NOI; closed June 15;
GOALKEEPERS JOE HART (Manchester City, 19/04/87, 58 caps) England's established number one and an experienced campaigner.
The pharmaceutical manufacturer's label and brand design remain unchanged, due to the combination of label and cap. In addition, the top of the cap allows space for bar code printing or NFC chip integration for electronic tracking.
HEIGHT: T: 6ft 10in 6ft 10in WEIG WEIGHT: T: 128kg 128kg CAP CAP CAPS: 42 42 EUAN MURRAY POSITION: POSITION: Full-back Full-back CLUB: CLUB: Glasgow Warriors Glasgow Warriors HEIG HEIGHT: T: 6ft 1in 6ft 1in WEIG WEIGHT: T: 118kg 118kg CAP CAP CAPS: 62 62 ALASDAIR DICKINSON POSITION: POSITION: Loosehead prop Loosehead prop CLUB: CLUB: Edinburgh Rugby Edinburgh Rugby HEIG HEIGHT: T: 6ft, 1in 6ft, 1in WEIG WEIGHT: T: 111kg 111kg CAP CAP CAPS: 39 39
If you forget to clean the screen cap and rubber vent grommet on top of the fuel cap, the cap gets plugged with dirt, creating a vacuum and causing fuel flow problems.
The conventional wisdom is that stocks thrive when interest rates are rising, but research from Fidelity indicates that small cap stocks do especially well.
Cap the attendance allowances and expenses in the Commons and the Lords.