Basis Points
-
Term
Main definition
-
One one-hundredth (1/100) of one percent. For example, if one percent (1%) were expressed in "basis points," it would be called "100 basis points." 50 basis points equals one-half of one percent.
Interest rates on loans are often quoted in terms of an index plus a margin, and the margin is often described in basis points, such as LIBOR or Prime plus 400 basis points. In the world of corporate finance, basis points are also used in other contexts, such as with regard to a change in dividend rates or in other comparisons between two similar percentages.
