Eligibility test

1. Which of the following best describes an interest rate cap? FAQ
   It provides the cap owner with a fixed interest rate on their borrowings.
   It provides the cap owner with upper and lower limits to the interest rate on their borrowings.
   It provides the cap owner with an upper limit to the interest rate on their borrowings, with no minimum lower limit other than specified by underlying borrowings.
2. What happens if the Benchmark Rate is above the Cap Rate? FAQ
   Nothing will happen.
   The cap owner pays the difference between the Cap Rate and the Benchmark Rate.
   The cap owner receives the difference between the Cap Rate and the Benchmark Rate.
   The cap terminates.
3. What happens if the Benchmark Rate is at or below the Cap Rate? FAQ
   Nothing will happen.
   The cap owner pays the difference between the Cap Rate and the Benchmark Rate.
   The cap owner receives the difference between the Cap Rate and the Benchmark Rate.
   The cap terminates.
4. What is the main risk of a Cap-It Certificate? FAQ
   Cap-It Certificates are entirely risk-free.
   The Certificate Holder may be required to pay a substantial exit fee to terminate the Cap-It Certificate early.
   The worst case is that the Certificate Holder pays the issue price to buy the Cap-It Certificate but receives nothing in return.
5. Is a Cap-It Certificate exactly the same as an interest rate cap? FAQ
   Yes, a Cap-It Certificate is exactly the same as an interest rate cap bought directly from a bank.
   No. A Cap-It Certificate has the same cash flows as an interest rate cap bought from a bank but contains an extra layer of credit risk.