Basis Point

A basis point or BP is a unit of measure used to describe the percentage change in financial instruments such as interest rates.

What is a basis point? 

A basis point or BP is a unit of measure used to describe the percentage change in financial instruments such as interest rates. One basis point is equal to one-hundredth of a percentage point or 0.01%. 

Why are basis points used instead of percentages? 

Basis points are used instead of percentages in certain contexts for precision and convenience, especially when dealing with small changes in interest rate. While a percentage is based on a scale of 100, a basis point is a smaller unit, representing one-hundredth of a percentage point. Using basis points allows you to express and communicate changes in a more granular yet straightforward manner. 

How much is 10 basis points? 

An increase of 10 basis points in interest rates equates to an increase of 0.1%. This is done by multiplying 0.01% (one basis point) by 10.

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