The upside of the change in Rates

We have already seen how a change in rates can be loss-making for a user. But it is equally likely that the rates change in favor of the users rather than otherwise.

This example would make a lot of sense to describe the above scenario:

Let us assumes the entry interest to be 5% and the exit interest rate to be 4% at the time of exit. You held the position for 3 months. In this case, you would accrue a better yield of 6.69% than what was promised i.e. 5%:

Moreover, the quoted APY is guaranteed even if the interest rates change and don't change in your favor.

Even if we take a deviation of 2% in the interest rate, the quoted APY is delivered to the lender. Let us assumes the entry interest to be 5% and the exit interest rate to be 7% at the time of exit. You held the position till maturity. In this case, you would accrue the promised APY i.e. 5% - fees.