Basis Point Definition

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Definition Of Basis Point:

One-hundredth of a percentage point (1/100 of 1%).
One percentage point equals 100 basis points. This term is commonly used in a trading context for futures contracts or when talking about price movements of bonds and loans. Also used in the context of the Federal Reserve moving the federal funds rate or the discount rate by 25 or 50 basis points.Other definition of basis point- Smallest measure of quoting the yield on a bond, note, or other debt instrument. One basis point is equal to one hundredth of one percent (0.01%): one percent of a yield equals 100 basis points. For example, an interest rate of 5 percent is 50 basis point higher than the interest rate of 4.5 percent. Similarly, a spread of 50 basis points (between the bid price and offer price of a bond) means the investor must pay 0.5 percent more to buy it than he or she could realize from selling it.

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