If the yield of a bond increases by 1/2%, how many basis points has the yield increased?

When discussing bond yields and their fluctuations, it's important to understand the relationship between percentage changes and basis points. A basis point is defined as one-hundredth of a percentage point, which means that an increase of one basis point equates to an increase of 0.01% in yield.

In this scenario, if a bond's yield increases by 1/2%, it equates to an increase of 0.5%. To convert this percentage increase into basis points, you multiply by 100 because there are 100 basis points in 1 percentage point. Therefore, a 0.5% increase can be converted as follows:

0.5% x 100 = 50 basis points.

This calculation demonstrates clearly that the correct answer to the question is 50 basis points, which is a direct reflection of the bond yield increase specified in the question. Understanding this relationship is crucial in financial contexts where precise yield measurement is necessary.