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In finance, a basis point is one
one-hundredth of a percent. For example, a 150 basis point rise in
interest rates is the same as a 1.5% rise. A 10 basis point fee is the
same as a 0.1% fee. When changes in interest
rates are quoted in basis points, it is always understood this indicates
an absolute change in the rate. This avoids the ambiguity that arises
when changes in interest rates are quoted as percentages. To illustrate, if
an interest rate were 5%, and we were told the rate rose one percent, it
wouldn't be clear whether the change were absolute, rendering a new rate
of
or relative, rendering a new rate of
If instead we were told the rate rose 100 basis
points, we would know the change was absolute and that the new rate must
be
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