| Basis Point |
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| fixed income market | |
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The basis point is commonly used for calculating changes in Interest Rate s, Equity Index es and the Yield of a Fixed-income Security . The type of interest rate has to be specified (''e.g.'', Bond yield, Zero-coupon yield, Act/360 Money Market rate, Act/365 money market rate, etc). Since certain loans and bonds may commonly be quoted in relation to some index or underlying security, they will often be quoted as a spread over (or under) the index. For example, a loan that bears interest of 0.50% above LIBOR is said to be 50 basis points over LIBOR. Examples A rate change from 5% to 6%, reflects a change of 1% or 100 basis points (Note 5% to 6% is actually a 20% increase: by using basis points, it is clear that the change in rate as an absolute number is being discussed.) A rate change from 6.7% to 6.9% reflects a change of .2% or 20 basis points. A rate change from 2.75% to 3.20% reflects a change of .45 or 45 basis points RELATED UNITS
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