What is a basis point?

The word basis comes from the base move between two percentages, or the spread between two interest rates. The basis point is commonly used for calculating changes in interest rates, equity indices, and fixed-income security yields. Basis points are also used when referring to the cost of mutual funds and exchange-traded funds.

What is 50 basis points?

50 basis points are the equivalent of 0.5%. If the Fed increased interest rates from 4.75% to 5.25%, you could say that interest rates rose 50 basis points. What Is 20 Basis Points? 20 basis points are the same as 0.2%. If, for example, a bond yield dropped from 7.65% to 7.45%, you could say it fell 0.2 percentage points or 20 basis points.

What is the difference between a basis point and a permyriad?

A basis point (often abbreviated as bp, often pronounced as "bip" or "beep" ) is one hundredth of 1 percentage point. The related term permyriad means one hundredth of 1 percent. Changes of interest rates are often stated in basis points. If an interest rate of 10% increased by 1 bp, it changed to 10.01%.

What is a percentage increase in basis points?

The increase from 10% is either 50 basis points (which is 10.5%) or 500 basis points (which is 15%). Although basis points primarily designate yields and interest rates, they may likewise refer to the percentage change in the value of an asset such as a stock.