Basis Price

  

There are actually two ways to describe the value of a debt security, like a bond.

They have a price, just like a stock or any other asset. This describes the amount of cash it would take to buy them. Bonds also come with yields, which describe how much an investor will make on their investment on an annual basis. This second category is also called its basis price. So a bond with a yield of 6% has a basis price of 6% as well.

Okay, just to explain the name a bit:

Interest rates and yields are often described in what is called "basis points." A basis point is one one hundredth of a percent. So a bond with a 6% yield also has a yield of 600 basis points.

Might seem like semantics, but it clarifies changes in prices. If you have a bond yielding 6% and you say that the yield "rose by 1%"...uh, yeah. That's a little ambiguous. It could mean that it increased one percentage point to 7%, or that it increased by 1%, meaning it increased to 6.06%. Talking about the yield in terms of basis points fixes the problem. "The yield increased by 100 basis points" creates no confusion. Unless, like, you're talking to a complete noob.

Anyway, that terminology provides the "basis" part of the "basis price."

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all the sounds of realization oh and golly gee willikers yes that too well [Man looking surprised]

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when you realize a gain or loss it means that you've turned an investment into

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for the front entryway one big double yellow line on the highway is crossed [Car driving along highway]

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year and then you go to sell it well you generally get a lower tax rate

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