What is a base point?

The basis point (I. E. BP) is a common unit used to measure the percentage change in financial data. A change of 0.01 per cent is equivalent to 1 basis point. A 100% change is equivalent to 10,000 basis points.

Where have you heard of the basis point?

Are talking about interest Rate you will often hear the term basis point when any of the changes. For example, you may hear about the basis point difference between the interest rates of two bonds or loans. Using base points instead of percentages avoids confusion when discussing changes or differences.

The information you need to know about the base point...

For example, if the current interest rate is 20%, if it goes up by 10%, should the result be 30% or 22%? Without specific clarification, both outcomes are possible.

However, if the interest rate is 20% and the increase is expected to be 1,000 basis points, it can be determined that it will reach 30%. If it rises by 200 basis points, it is 22%. The base point facilitates a simpler and clearer understanding of percentage changes.

Here is a list of key points to keep in mind:

• 1 Bp = 0.01%
• 10 bps = 0.1%
• 100 bps = 1%
• 1000 basis points = 10%
• 10000 bps = 100%