A basis point is a unit of measure used in finance to describe the percentage change in the value or rate of a financial instrument. One basis point is equivalent to 0.01% (1/100th of a percent) or 0.0001 in decimal form. In most cases, it refers to changes in interest rates and bond yields.
For example, if the Federal Reserve Board raises interest rates by 25 basis points, it means that rates have risen by 0.25% percentage points. If rates were at 2.50%, and the Fed raised them by 0.25%, or 25 basis points, the new interest rate would be 2.75%.
In the bond market, a basis point is used to refer to the yield that a bond pays to the investor. For example, if a bond yield moves from 7.45% to 7.65%, it is said to have risen 20 basis points.
The usage of the basis point measure is primarily used in respect to yields and interest rates, but it may also be used to refer to the percentage change in the value of an asset such as a stock. It may be heard that a stock index moved up 134 basis points in the day's trading. This represents a 1.34% increase in the value of the index.
The easiest way to convert basis points into a percent form is by simply taking the amount of basis points and multiply by 0.0001 which will give the percent in decimal form. So if you have to convert 384 basis points into a percent, simply multiply 384 by 0.0001. This will give you 0.0384 which is 3.84% (0.0384 x 100).
This can also be done in reverse to find out the number of basis points that a percent represents by dividing the percent (in decimal form) by 0.0001. For example, say the rate on a bond has risen 2.42%, simply take 0.0242 (2.42% / 100) and divide by 0.0001 to get 242 basis points.
(For more on interest rate changes, see our Bond Basics Tutorial.)

What does it mean when someone says that a stock went up X points? Does this refer ...
For stocks, one point equals one dollar. So when you hear that a stock has lost or gained X number of "points", this is the ... Read Answer >> 
How does the bond market react to changes in the Federal Funds Rate?
Discover how the bond market reacts to changes in the federal funds rate. The riskfree rate of return is a major factor ... Read Answer >>

Trading
A Common Base for Understanding Changes in Value
A discussion of basis points as well as basis point calculations using Excel. 
Investing
How Points Relate to Financial Instruments
Points usually refer to the measurement of some change in a financial instrument’s value. 
Managing Wealth
What Determines Your Cost Basis?
In any transaction between a buyer and seller, the initial price paid in an exchange for a product or service will qualify as the cost basis. When it comes to securities and related financial ... 
Managing Wealth
Know Your Stock Cost Basis
Understanding equity cost basis is critical for tracking the gains or losses of an investment. 
Investing
How Rising Interest Rates Impact Bond Portfolios
A look at the impact that changing interest rates  rising or falling  have on bonds and what investors need to consider. 
Investing
How Interest Rates Affect Mutual Funds
Find out how changing interest rates impact mutual funds, including bond and money market funds, and how higher rates can discourage investors. 
Investing
5 Basic Things To Know About Bonds
Learn these basic terms to breakdown this seemingly complex investment area. 
Financial Advisor
Rising Rates: What It'll Mean for Stocks and Bonds
A look at what rising interest rates could mean for the equity and bond markets.

Basis Point (BPS)
A unit that is equal to 1/100th of 1%, and is used to denote ... 
Price Value of a Basis Point  PVBP
A measure used to describe how a basis point change in yield ... 
Points
1. A 1% change in the face value of a bond or a debenture. 2. ... 
Decimal Trading
A system in which the price of a security is quoted using a decimal ... 
Decimalization
A system where security prices are quoted using a decimal format ... 
Bond Yield
The amount of return an investor will realize on a bond. Several ...