1. Which of the following best describes an interest rate cap?
a) It provides you with a fixed interest rate on your borrowings.b) It provides you with upper and lower limits to the interest rate on your borrowings.c) It provides you with an upper limit to the interest rate on your borrowings, with no minimum lower limit.

2. What is Base Rate?
a) It is the official bank rate (also called the Bank of England Base Rate) and is the interest rate that the Bank of England charges banks for secured overnight lending. It is the British Government’s key interest rate for enacting monetary policy.b) It is the minimum rate of interest that banks are required to pay on deposit accounts in the UK.

3. What is LIBOR?
a) LIBOR is a measure of performance of the top 100 companies by market capitalisation on the London Stock Exchange.b) LIBOR stands for London Interbank Offered Rate and is a widely used benchmark for short-term interest rates.

4. What is meant by the term ‘Reference Interest Rate’?
a) It is the market interest rate (normally Base Rate or LIBOR) that applied on the purchase date of the cap.b) It is the market interest rate (normally Base Rate or LIBOR) against which payments under the interest rate cap are referenced.

5. What does the term ‘Cap Rate’ refer to?
a) The rate you will earn on your purchase an interest rate cap.b) The level of the Reference Interest Rate above which payments under the cap will be triggered.

6. What happens if you own an interest rate cap and the Reference Interest Rate is above the Cap Rate?
a) You must pay the difference between the Cap Rate and the Reference Interest Rate.b) You will receive the difference between the Cap Rate and the Reference Interest Rate.c) Nothing will happen.

7. What happens if you own an interest rate cap and the Reference Interest Rate is at or below the Cap Rate?
a) Your cap will terminate.b) You must pay the difference between the Cap Rate and the Reference Interest Rate.c) You will receive the difference between the Cap Rate and the Reference Interest Rate.d) Nothing will happen. You will only receive payments if the Reference Interest Rate is above the Cap Rate.

8. Which of the following best describes an interest rate cap?
a) Caps are entirely risk-free.b) You may be required to pay a substantial exit fee if you terminate the cap early.c) The worst case is that you will pay a premium for the cap but receive nothing in return.

9. What is a 'Cap-It Certificate'
a) A Cap-It Certificate represents a share in Cap-It.b) A Cap-It Certificate is a non-negotiable debenture issued by Cap-It that has the same cash flows as an interest rate cap.

10. What happens if you own a Cap-It Certificate and the Reference Interest Rate is above the Cap Rate?
a) You must pay the difference between the Cap Rate and the Reference Interest Rate.b) You will receive the difference between the Cap Rate and the Reference Interest Rate.c) Nothing will happen.

11. What happens if you own a Cap-It Certificate and the Reference Interest Rate is above the Cap Rate?
a) You may be required to pay a break cost to terminate the Cap-It Certificate. The break cost could be substantial and will depend on factors including the level of market interest rates and the remaining life of the Cap-It Certificate.b) You may return the Cap-It Certificate to Cap-It for the price you paid for it.c) You may sell your Cap-It Certificate on the secondary market and transfer it to a new owner.d) Cap-It may, at its sole discretion, agree to repurchase your Cap-It Certificate, at a price that it will determine (and that price may be zero).

12. What is the main risk of a Cap-It Certificate?
a) Cap-It Certificates are entirely risk-free.b) The worst case is that you will pay a premium for the Cap-It Certificate but receive nothing in return.c) You may be required to pay a substantial exit fee if you terminate the Cap-It Certificate early.

13. What initial and annual fees are payable by Certificate Holders?
a) Certificate Holders must pay an initial service fee over and above the Issue Price of their Cap-It Certificate. The additional fee is required to pay Cap-It’s third-party service providers, including the Administrator and the Calculation Agent. Certificate Holders must pay to Cap-It an annual fee of 0.1% of the amount protected. This fee enables Cap-It to pay its third-party service providers, including the Administrator and the Calculation Agent. If a Certificate Holder fails to pay the annual fee, its Cap-It Certificate will be cancelled.b) Certificate Holders pay the Issue Price for their Cap-It Certificate, but after that they have no further fees to pay. The Issue Price includes a service fee element (over and above the cost of the underlying Cap Investment), which fee is used by Cap-It to pay its third-party service providers. The underlying Cap Investment has a lower cap rate than the associated Cap-It Certificate, meaning that if and when the Cap Rate of a Cap-It Certificate is exceeded, Cap-It will earn a spread, which will support the ongoing maintenance of the Cap-It Certificate.

14. If the Underlying Counterparty defaults on a payment in respect of a Cap Investment, will payment to the Certificate Holder of the associated Cap-It Certificate be affected?
a) No, payment to the Certificate Holder will be unaffected. This is because Cap-It will contribute the funds required to make up for any shortfall caused by the Underlying Counterparty’s default.b) Yes, payment to the Certificate Holder will be adversely affected. This is because Cap-It is only obliged to make payment to the Certificate Holder to the extent that it has received payment from the Underlying Counterparty in respect of the associated Cap Investment. If the Underlying Counterparty fails to make payment in full, then the relevant payment to the Certificate Holder of the associated Cap-It Certificate will be reduced accordingly.

15. What would happen if Cap-It Issuer Limited became insolvent?
a) Cap-It Certificates are capital-protected, meaning that you are guaranteed to receive at least as much as you invested.b) The value of Cap-It Certificates would likely fall and could be worth nothing at all.

16. If Cap-It Issuer Limited became insolvent, would you have the right to collect from the Underlying Counterparty?
a) Yes, the Underlying Counterparty will compensate you for any losses in respect of your Cap-It Certificate.b) No, Certificate Holders have no contractual or other relationship with the Underlying Counterparty nor any right to collect from the Underlying Counterparty on the Cap-It Certificate or the corresponding Cap Investment.

17. Which of the following most accurately describes the similarities between an interest rate cap and a Cap-It Certificate?
a) A Cap-It Certificate is exactly the same as an interest rate cap.b) A Cap-It Certificate has the exactly the same cash flows as an interest rate cap but is an illiquid, non-transferable investment which also contains an additional layer of credit risk compared to an interest rate cap.

18. Is the Issue Price of a Cap-It Certificate returned to the Certificate Holder at the Maturity Date?
a) No. The Issue Price paid by the purchaser of each Cap-it Certificate will be applied solely by the Issuer to finance the Issuer’s purchase of a Cap Investment from an Underlying Counterparty and payment of its fees. Accordingly, there will be no repayment of the Issue Price on the Maturity Date of a Cap-It Certificate.b) Yes. The Certificate Holder pays the Issue Price for the Cap-It Certificate at the outset. The Issue Price is returned to the Certificate Holder at the Maturity Date of the Cap-It Certificate.

19. Are Cap-It Certificates tradeable investments?
a) Yes. There will be an active secondary market for Cap-It Certificates, meaning that Certificate Holders may cash in their Cap-It Certificates at any time.b) No. Cap-It Certificates are non-transferable and also “non-mainstream pooled investments” (as defined in the FCA Handbook) and are illiquid, meaning they cannot be traded, which may make them a higher risk investment than a tradeable investment.

20. Does Cap-It provide advice regarding the purchase of Cap-It Certificates?
a) Yes. Cap-It acts as an agent, fiduciary and advisor to any person deciding to purchase a Cap-It Certificate.b) No. Neither Cap-It nor any of its third-party service providers any investment, legal, accounting, regulatory or tax advice with respect to the Cap-It Certificates.

New Bridge Street House, 30-34 New Bridge Street, London EC4V 6BJ | E: caps@capit.co.uk ​| T: ​0208 004 5847 | Companies House No: 11231659

Photography by: Ben Davies | Website by: Pink Sea Studios