In context with bank interest rates, if an interest rate is reduced by 50 basis points it means an effective reduction of ___:

[A]50%

[B]5%

[C]0.5%

[D]0.05%

**0.5%**

Basis Points is a unit of measurement which is equal to 1/100th of 1%. This is used to measure changes in interest rates, stock-market indices or yield on fixed income securities. For example, if an interest rate is reduced by 50 basis points it means an effective reduction of 0.5%.