Definition of Basis Point
What is a "basis point"? What is the definition of the term "basis point"?
A "basis point" is simply 1/100th of a percentage point.
For instance - let's say that an interest rate moves from 4.0% to 4.1%. This would be a 0.1% move, or 10/100ths of a percentage point, or 10 basis points.
So, in this case, we could say that the interest rate increased by 10 basis points.
Another example - the yield on a bond slips from 7.1% down to 6.8%. This would be a 0.3% move lower, or 30/100ths of a percentage point, or 30 basis points.
In this case we could say that the yield on this bond dropped 30 basis points, which equals 0.3%.
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