What is a Basis Point?
Basis Point Calculator: A basis point (often abbreviated as "bps") is a unit of measurement used in finance to describe changes in interest rates, investment returns, or other percentages. One basis point is equal to 0.01%, or 1/100th of a percent. For example, a change from 2.00% to 2.50% is a 50 basis point increase.
Why are Basis Points Important?
Basis points provide a clear way to express small percentage changes, which are common in financial transactions. This precision helps avoid confusion when discussing changes in interest rates, bond yields, or other financial metrics.
How to Calculate Basis Points
To calculate the value of a basis point, use the following formula:
Value of 1 Basis Point = (1 / 10,000) x Total ValueFor example, if you are working with $100,000, one basis point would be:
(1 / 10,000) x $100,000 = $10Using the Basis Point Calculator
Our Basis Point Calculator simplifies this process. Enter the total value and the number of basis points, and the calculator will instantly compute the result for you.
Examples of Basis Point Calculations
1. A 25 basis point increase on a $500,000 loan:
(25 / 10,000) x $500,000 = $1,2502. A 75 basis point decrease on an investment of $1,000,000:
(75 / 10,000) x $1,000,000 = $7,500