A point is a measure of the change in an interest rate or the price of a security. Here are several ways in which the term is used:
- A fee paid to a lender by a borrower. Each point equals 1% of the amount borrowed.
- The rate paid on a mortgage. Each point represents an additional 1% above the prime rate.
- A change in the price of a bond, where each point equals a 1% change in the value of the bond.
- A change in the value of a futures contract, where each point equals 1/100th of a cent.