Business and Personal Finance Dictionary

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• BASIS POINT
  
  Yields on bonds, notes, and other fixed-income investments fluctuate regularly, typically changing only within hundredths of a percentage point. These small variations are measured in basis points, or gradations of 0.01%, or one-hundredth of a percent, with 100 basis points equaling 1%. For example, when the yield on a bond changes from 6.72% to 6.65%, it has dropped seven basis points. The term is also used to describe small changes in the interest rates charged for mortgages or other loans, and to indicate your percentage of ownership in certain kinds of investments, where each basis point equals 0.01% of the whole investment.
  
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