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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 ?
1 ADD fuel stabilizer to the gasoline, run the engine for five minutes and then remove the spark plug and pour two capfuls of engine oil into the spark plug hole.
Two capfuls of diphenhydramine (approximately 50 mg) had been given to the child that morning, and Caladryl had been applied.
Just pour two capfuls of Sharper Image's proprietary Cleaning & Conditioning Concentrate into the tank and add water; clip the eyeglasses or sunglasses to the bottom of the open lid and close it.
According to Ideal Standard, the formula for a great soak only takes 80 litres of water, two capfuls of bubble bath, a temperature of 39 degrees and 12 minutes 32 seconds soaking.
Add a couple of capfuls of this fragrant oil to your bedtime bath and you'll be sent off to the Land Of Nod in no time.
He gave a two-year history of using about 32 capfuls or ounces of GHB per week, (one ounce = about 2 g, range 0.
Add enough warm water to cover fish and spike water with 1/2 lemon or 2 capfuls of lemon extract.
Drizzle two capfuls of the Time for Two Bathing Milk into a bath of steaming water.