Basis Point Calculator

What this calculator does

If you follow interest rates at all, you have heard the phrase: the Fed raised rates by 50 basis points, a bond yield moved 20 basis points, a fund charges 75 basis points. It is finance's favorite unit, and this tool does two things with it. It converts a figure between basis points, percent, permille, and plain decimals, and it works out what that slice actually comes to on a real amount of money.

So you can ask a very practical question, like what 25 basis points of your loan balance is in dollars, and get a straight answer.

What a basis point is

Here it is in one line: one basis point is one hundredth of one percent.

So 1 basis point is 0.01%, which is 0.0001 as a decimal. Stack up a hundred of them and you get 1%. That is the whole definition. A basis point is just a very small, very precise unit for talking about rates, and because it is so small, it lets people describe tiny movements without tripping over fractions of a percent.

Why finance talks in basis points

You might wonder why anyone bothers when we already have percentages. The answer is that percentages get dangerously ambiguous when you change one percentage by another.

Say a rate goes from 5% to 5.5%. Did it rise by 0.5%, or by 0.5 percent of 5, which would be a much smaller move? Spoken out loud, "the rate rose half a percent" could mean either. Basis points kill that confusion dead. "The rate rose 50 basis points" can only mean one thing: it went up by exactly 0.50 percentage points. That precision is why central banks announce rate changes in basis points, why bond traders quote spreads in them, and why fund fees are described in them. When small differences move large sums, you cannot afford to be vague, and basis points are how the industry stays exact.

A worked example: putting bps into money

Numbers make it click. Ask the tool what 1.5 basis points of 65,000 is. That is 1.5 hundredths of a percent, or 0.00015 as a decimal, and multiplied by 65,000 it comes to $9.75.

Scale it up to something you would actually care about. A lender raises the rate on a 300,000 mortgage by 50 basis points. That is 0.50%, or 0.005 as a decimal, which on 300,000 is $1,500 a year in extra interest. Suddenly that small-sounding unit is a real number on your budget. And the conversions are just as handy: 25 basis points is 0.25%, which is 0.0025 as a decimal. Once you see bps turned into money, the phrase stops being jargon and starts being something you can act on.

The four units, and switching between them

The dropdown lets you enter your figure in whichever unit you have it in, and the tool handles the conversion:

• Basis points (bps). Hundredths of a percent. Divided by 10,000 to get the decimal.
• Percent (%). The everyday unit. Divided by 100.
• Permille. Parts per thousand, one tenth of a percent each. Divided by 1,000.
• Decimals. The raw fraction itself, used as-is. Here a value of 0.005 simply means 0.005 of the amount.

Pick the unit that matches the number in front of you, and the calculator does the rest.

How to use it

• x bps. The figure you want to apply, and the unit it is in, chosen from the dropdown.
• of... The amount you want that slice of.

Press Calculate to see what it comes to, spelled out in a plain sentence. Press Reset to clear it. If you want to see how a rate change of a few basis points actually moves a loan payment, our mortgage calculator is a good next stop.

Questions people ask

What is a basis point?

A basis point is one hundredth of one percent, or 0.01%. It is a small, precise unit used across finance to describe changes in interest rates, yields, and fees.

How many basis points are in 1 percent?

One hundred. Since each basis point is 0.01%, it takes 100 of them to make up 1%. So 50 basis points is half a percent, and 200 basis points is two percent.

Why not just say percent?

Because saying a rate changed by a percentage of a percentage is ambiguous. "Rose 50 basis points" can only mean 0.50 percentage points, while "rose half a percent" could be read two ways. Basis points remove that confusion.

References

The definition of a basis point as one hundredth of one percentage point follows the Legal Information Institute at Cornell Law School, with the finance-industry usage described by Corporate Finance Institute.

1. Legal Information Institute, Cornell Law School. Basis point. https://www.law.cornell.edu/wex/basis_point
2. Corporate Finance Institute. Basis Points (BPS). corporatefinanceinstitute.com