Limits on Repurchase Price

D

The answer to the question is A. Price-cap provision.

A price-cap provision is a mechanism that sets a maximum limit on the repurchase price of a certificate. It restricts the amount that can be paid to repurchase a certificate to a stipulated percentage of its face amount. This provision ensures that the repurchase price does not exceed a certain threshold, providing protection to the issuer or repurchaser.

The face amount of a certificate refers to the original value or principal amount of the certificate. It is the amount stated on the certificate itself, representing the initial investment or the nominal value of the security. When a certificate needs to be repurchased, the repurchase price is the amount paid by the issuer or repurchaser to the certificate holder.

The price-cap provision is typically included in contractual agreements or governing documents that outline the terms and conditions of the certificate. By setting a limit on the repurchase price, it helps manage the financial exposure and risk for the issuer or repurchaser. It ensures that the repurchase price remains within a reasonable range, preventing excessive payments and potential financial losses.

In summary, the price-cap provision is a mechanism that imposes a maximum limit on the repurchase price of a certificate, which is set as a stipulated percentage of the face amount. It serves to protect the interests of the issuer or repurchaser by preventing excessive repurchase payments.