How to Calculate a Basis Point Charge

by Matt McGew

A single basis point is 1/100 of a percentage point, or .01 percent. In finance, the basis point is commonly used to express percentages of less than 1 percent. Additionally, many financial institutions use the basis point concept to quantify fees associated with a financial transaction. You can calculate the basis point charge with some basic information about the financial transaction.

Step 1

Determine the principal amount. For example, assume the principal is $10,000.

Step 2

Determine the number of basis points changes. For example, assume the basis point change is 50 basis points.

Step 3

Multiple the number of basis points by .01. Continuing the same example from the previous steps, 50 x .01 = 0.5 percent. This figure represents the basis point change expressed as a percentage.

Step 4

Multiple the basis point percentage by the principal amount. Continuing the same example, 0.5 x $10,000 = $5000. This figure represents the basis point change expressed as a dollar amount.

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