What Are Basis Points? Definition, How to Use and How to Calculate

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What is a basis point?
When are basis points used?
- The Federal Reserve: “The Fed announced a rate increase of 25 basis points.”
- Mortgage rates: “Mortgage rates have increased a whopping 400 basis points in less than a year.”
- Investing: “The average expense ratio for mutual funds dropped 3 basis points last year.”
How to calculate basis points (bps)
- 0.30% x 100 = 30 basis points
- 75 basis points / 100 = 0.75%
Basis Points | Percentage |
---|---|
1 | 0.01% |
5 | 0.05% |
10 | 0.10% |
50 | 0.50% |
100 | 1% |
500 | 5% |
1,000 | 10% |
5,000 | 50% |
10,000 | 100% |
50,000 | 500% |