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The basis for 'basis points'

David and Tom Gardner
David and Tom Gardner
Posted: Thursday, February 14, 2013, 6:42 AM

Q: I always hear about "basis points." What are they?

-C.C., Niwot, Colo.

A: A basis point is 1/100th of a percentage point. So if you hear that some interest rate is down 25 basis points, that means it's down a quarter of a percentage point.