What is a basis point vs a percentage?

In order for traders and lenders to be more precise about interest rates, they often talk in terms of basis points rather than percentages. One basis point is equal to 1/100th of one percent, or 0.01%.

What is 100 basis points?

A basis point is one hundredth of a percent, so 100 basis points is equivalent to 1%. “Basis point” is sometimes abbreviated to “bp” and “basis points” to “bps.” When are basis points used? Basis points are often used to measure a difference in percentages.

What are basis points (bps)?

Final Thoughts Basis Points (BPS) FAQs What Are Basis Points? Basis points (BPS) are a unit of measurement used in finance to describe changes in percentage values, such as interest rates or the yield of an investment. One basis point equals 0.01% or 0.0001 in decimal form. BPS is especially important in reflecting changes that are less than 1%.

What is a basis point in decimal form?

One basis point is equivalent to 0.01% (1/100th of a percent) or 0.0001 in decimal form. Likewise, a fractional basis point such as 1.5 basis points is equivalent to 0.015% or 0.00015 in decimal form. In most cases, basis points refer to changes in interest rates and bond yields.