Basis Point (bp)
Definition
A basis point is one one-hundredth of a percentage point: 1 bp = 0.01%, so 100 bps = 1.00%. It is the standard unit for quoting changes in interest rates, bond yields, credit spreads, and fee rates.
The unit exists to avoid ambiguity. Saying a yield 'rose 1%' could mean from 5.00% to 6.00% or from 5.00% to 5.05%; saying it rose 100 bps unambiguously means 5.00% to 6.00%. Management fees, underwriting fees, and lending spreads are also commonly quoted in bps (e.g., a fee of 50 bps on assets = 0.50% per year).
Why interviewers ask
Fluency with bps is table stakes — interviewers notice immediately if you fumble the conversion. Mental-math questions ('the 10-year moved 25 bps, what does that do to a bond with duration of 6?') assume you convert bps to decimals instantly, and fee or spread discussions in any coverage group are quoted this way.
Related terms
Interviews don't test definitions — they test recall under pressure.
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