A basis point is a unit of measure in finance to describe the small percentage change in the interest rates of financial securities. One basis point is equivalent to 0.01% or 1/100th of a percent. If your local bank raises the interest rate on its one year CD by 25 basis points it means that rates have risen by 0.25% percentage points. If the rate on the one-year CD was at 3.25%, and that bank raised them by 0.25%, or 25 basis points, the new interest rate on the one year CD would be 3.50%.

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