Question

Outline what is meant by 50 basis points

Answer 1

A basis point is the smallest measure used in quoting yields on fixed income products. Basis points also pertain to interest rates. One basis point is equal to one one-hundredth of one percentage point (0.01%). Therefore, 100 basis pointswould be equivalent to 1%.

Answer 2

50 basis points is 0.5%.

Basis points also known as BPS, it can be described as the common unit of measure for interest rate and percentages in finance.  One basis point is equals to one-hundredth of a percentage point, which implies 1/100 of 1%.

Further Explanation

Basis point is used to represent the percentage change in financial instrument. It is commonly used in financial calculation and also in analyzing a change in interest rate. The basis point, the basis is from the base move between the spread between two interest rate or two percentages.

The “basis” represents a fraction of a percentage because the recorded changes are commonly narrow.

Basis points can be used to calculate changes in equity and interest rate. In fact, basis point is the term that is used to quote bonds and loans. In bond markets, basis point is the smallest measure that is used for quoting yields. In foreign exchange, basis points are called pips, which mean price interest points.  

Basis points are used in investments as well. They are used when investors are referring to the exchange traded funds and the cost of mutual funds. For example, a mutual fund with a yearly management expense ratio of 0.15% will be quoted to be having 15 basis points.

Basis Points Percentage Terms

1                        0.01%

5                        0.05%

10                        0.1%

50                        0.5%

100                        1%

1000                10%

10000                100%

KEYWORDS:

• basis points
• bps
• interest rate
• percentage
• pips