• A basis point is a standard measure of interest rates and other percentages in finance. – One basis point is equal to 1/100th of 1%, or 0.01% (and 0.0001 in decimal).
  • The word “basis” comes from the underlying movement between two percent or the spread between two interest rates.
  • The basis point is commonly used to calculate changes in interest rates, stock indices, and returns on fixed income securities.
  • Basis points are also used when referring to the value of mutual funds and exchange-traded funds.