Listen to a Business English Dialogue about Basis point
Jeremy: Hey Claire, have you ever heard of a basis point in finance?
Claire: Yes, I have. It’s a unit of measure used to describe the percentage change in interest rates or financial instruments.
Jeremy: Exactly. One basis point is equivalent to one-hundredth of a percentage point, making it a useful tool for comparing small changes in interest rates or yields.
Claire: That makes sense. So, if the interest rate increases by 25 basis points, it means it has increased by 0.25%.
Jeremy: Exactly. It’s commonly used in the financial industry to discuss changes in interest rates, bond yields, or other financial metrics.
Claire: Are basis points only used for interest rates?
Jeremy: No, they can be used to measure changes in any percentage-based metric, such as returns on investments or changes in bond prices.
Claire: That’s interesting. It seems like a convenient way to express small changes in percentages.
Jeremy: Definitely. It provides a standardized way to communicate changes in financial markets without having to deal with cumbersome decimal points.
Claire: Thanks for explaining, Jeremy. I’ve learned something new today.
Jeremy: No problem, Claire. I’m always happy to discuss finance topics and help clarify any questions you may have.