Basis point definition

A basis point is one hundredth of one percent, or 0.01%. For example, when an interest rate is said to have been increased by 50 basis points from 5.00%, the new rate is 5.50%. The calculation is: ((50 basis points X 0.01% per basis point) + 5.00% existing rate) = 5.50%.

Basis points are used as a means of describing the incremental interest rate changes for securities and interest rate reporting.