Wednesday, December 29, 2010

Basis Point

The term basis point refers to one one-hundredth of one percent or 0.01%. It is a commonly used term in financial markets when referring to any percentages or percentage changes. For example a fund may charge 60 basis points i.e. 0.60%, the US Federal Reserve may raise interest rates by 25bps i.e. 0.25%, a fund manager may have a track record of beating the index by 280 basis points i.e. 2.80%. Another rule of thumb is that 100 basis points equals one percent (1.00%).

Synonyms: bp, pip, one-hundreth of one percent

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