Basis points, percentages, decimal points

ok… so this is a bit embarassing, but can be confusing at some points.

1.0% = 100 basis points = 0.01

5 basis points = 0.05% = 0.0005

Anyone have easy ways to understand this and not screw up?

One basis point is 1/100 of 1%.

I’m not sure it gets any easier than that.

(Full disclosure: I worked at PIMCO for 6 years, so basis points are now firmly entrenched in my DNA.)

First, no question is embarassing. Actually nothing in the cfa curriculum is obvious. What may seem obvious to one person is not to another, all depending on your background I did not use to need this one at work so i just had to learn it by heart. Good luck!!

Another way that i find it easier:

  1. to convert 1bps to percentage just type 1 on your TI BA II and press the “%” key once (your screen should show 0.01).

  2. to convert 1bps to decimals just type 1 on your TI BA II and press the “%” key twice (your screen should show 0.0001).

A pretty fail-safe method:

  1. Write out the word BASIS

  2. Put a decimal after the B (i.e. B.ASIS)

  3. Insert the number of basis points at the end

1bp --> BASIS --> B.ASIS --> 0.0001

100bp --> BASIS --> B.ASIS --> 0.0100

Thanks aloha312.

So if it is 50 bps then BASIS - > B.ASIS - > 0.0050