BPS Calculator

A basis point (bps) is a unit of measurement equal to 1/100th of 1 percent (0.01%) or 0.0001 in decimal form. Basis points are commonly used in finance to describe changes in interest rates, bond yields, and other percentage-based financial metrics. For example, if interest rates increase from 3.50% to 3.75%, they have risen by 25 basis points.

To convert basis points to percentage, divide the number of basis points by 100. The formula is: Percentage = Basis Points ÷ 100. For example, 50 bps ÷ 100 = 0.50%. You can also use our percentage calculator to perform related percentage calculations.

Finance professionals use basis points to eliminate ambiguity and provide precision. When someone says "rates increased by 1%," it's unclear whether they mean 1 percentage point (e.g., 5% to 6%) or 1% of the current rate (e.g., 5% to 5.05%). Using basis points removes this confusion - "100 bps increase" always means adding 1 percentage point, while "5 bps" clearly indicates a 0.05% change.

100 basis points equal 1 percent. This is because each basis point represents 0.01%, so 100 × 0.01% = 1%. Therefore, if the Federal Reserve raises interest rates by 100 basis points, they are increasing rates by 1 full percentage point.

When the Federal Reserve raises interest rates by 25 basis points, it means they are increasing the federal funds rate by 0.25% (or one-quarter of a percent). For example, if rates were at 5.00%, a 25 bps increase would move them to 5.25%. The Fed typically adjusts rates in 25 or 50 basis point increments during their policy meetings to manage economic conditions and inflation.

Bond yields are commonly expressed in basis points when discussing spreads and changes. For instance, if a 10-year Treasury bond yields 4.50% and a corporate bond yields 5.25%, the "spread" is 75 basis points (0.75%). Even small changes in bond yields, measured in basis points, can significantly impact bond prices and investor returns, especially for large portfolios.

To calculate the dollar impact of a basis point change, multiply your principal amount by the basis points and divide by 10,000. The formula is: Dollar Change = Principal × (Basis Points ÷ 10,000). For example, a 50 bps increase on a $1,000,000 investment equals $5,000 ($1,000,000 × 50 ÷ 10,000). You can also use our discount calculator for similar percentage-based calculations.

Yes, investment management fees and mutual fund expense ratios are commonly expressed in basis points. For example, an expense ratio of 75 basis points means the fund charges 0.75% of assets annually. A 50 bps fee on a $100,000 portfolio equals $500 per year ($100,000 × 0.0050). Understanding fees in basis points helps investors compare costs across different investment products.

A percentage point is the arithmetic difference between two percentages, while a basis point is 1/100th of a percentage point. For example, if rates increase from 3% to 5%, that's a 2 percentage point increase or 200 basis points. The key difference: percentage points measure the absolute difference, while basis points provide more granular measurement. 1 percentage point = 100 basis points.

Mortgage rates fluctuate daily, often by just a few basis points, in response to economic data, Fed policy, and bond market movements. For homebuyers, even a 25 basis point (0.25%) change can significantly impact monthly payments on large loans. For example, on a $400,000 30-year mortgage, a 25 bps rate increase from 6.50% to 6.75% would add approximately $60 to the monthly payment, or about $21,600 over the life of the loan.