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.

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Treasurer's Guidebook