What this calculator does
A basis point (bp) is one hundredth of a percentage point. This tool converts a basis-point figure into its percentage and decimal equivalents, applies it to a starting interest rate, and shows the annual dollar impact on a principal or notional amount. Enter the number of basis points, a base rate, and a principal, then read the four results.
The formulas
- Percentage: basis points ÷ 100. So 25 bps = 0.25%.
- Decimal: basis points ÷ 10,000. So 25 bps = 0.0025.
- New rate: base rate + (basis points ÷ 100). A 5.00% rate plus 25 bps becomes 5.25%.
- Dollar impact: principal × (basis points ÷ 10,000). On $100,000, 25 bps is $250 per year.
Because 100 basis points equal exactly one percentage point, the conversion is always exact — there is no rounding or estimation involved. Basis points can be negative to represent a rate cut: a −25 bp change lowers a 5.00% rate to 4.75%, and the annual dollar impact turns negative to match.
Where basis points are used
- Central-bank rate moves, as in "the Fed raised rates by 25 basis points."
- Bond yields and the yield spread between two securities.
- Fund expense ratios and management fees — a 50 bp fee is 0.50% of assets per year.
- Loan, mortgage, and APR quotes, where a small rate change is easier to state in basis points.
Frequently Asked Questions
What is a basis point?
A basis point (bp) is one hundredth of a percentage point: 1 bp = 0.01% = 0.0001. Finance uses it to state small interest-rate, yield, and fee changes precisely. 100 basis points equal 1 percentage point.
How do I convert basis points to a percentage?
Divide the basis points by 100. So 25 bps = 25 ÷ 100 = 0.25%, and 150 bps = 1.50%. For the decimal form, divide by 10,000 instead, so 25 bps = 0.0025.
How much is 25 basis points on $100,000?
Multiply the principal by the basis points divided by 10,000: $100,000 × 25 ÷ 10,000 = $250 per year. That is how a basis-point fee, such as a fund expense ratio, becomes a dollar cost.
Why use basis points instead of percentages?
Saying a rate rose 50 basis points is unambiguous, while saying it rose 50 percent could mean half again as much or a jump of 50 percentage points. Basis points remove that confusion for the small moves common in rates, yields, and spreads.