# Points

## What are 'Points'

1. A 1% change in the face value of a bond or a debenture.

2. In futures contracts, a price change of one one-hundredth, or 1% of one cent.

3. A \$1 price change in the value of common stock.

4. In real estate mortgages, the initial fee charged by the lender, with each point being equal to 1% of the amount of the loan. It can also refer to each percentage difference between a mortgage's interest rate and the prime interest rate.

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## BREAKING DOWN 'Points'

1. It is common to hear changes in bond prices stated in points. For example, if a bond with a face value of \$1,000 increases in price by \$20, it is said to have risen two points (2%).

2. For futures traded in decimal form, the price of a contract can change in increments of one point. This means that if a futures contract decreased in price by 50 points, it would have dropped \$0.50.

3. If a stock is up two points, then it really means that the stock is up \$2. Don't confuse points with percentages when talking about stocks. If a \$5 stock rises by \$2, it has risen two points. Similarly, if a \$50 stock rises by \$2, it has also risen two points, although the two-point increase is a much greater percentage change for the \$5 stock than for the \$50 stock.

4. A loan may be quoted as prime plus two points. This means that your loan interest rate is 2% higher than the prime rate of lending. If the prime rate was 5%, your mortgage rate would be 7%. If your bank also charged an up-front fee for the loan, it could express that fee in points. If your loan was \$100,000 and your bank charged a \$3,000 fee, the fee could be stated as three points.

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