Basis point

Basis points (BPS) are a measure for interest rates and other percentages in investment. One basis point is equivalent to 1/100th of 1%, or 0.01%, or 0.0001, and it indicates the percentage alteration in a financial tool.

The “basis” in basis point derives from the base move amongst two percentages, or the extent amongst two interest rates.

As the alterations recorded are usually constricted, and small fluctuations can have outsized outcomes, the “basis” is a fraction of a percent.

The basis point is usually used for calculating changes in interest rates, equity indices, and fixed-income security earnings.

Basis points are also used to mention the cost of mutual funds and exchange-traded funds.

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