DEFINITION of 'Discount Margin  DM'
The return earned in addition to the index underlying the floating rate security.
INVESTOPEDIA EXPLAINS 'Discount Margin  DM'
The size of the discount margin depends on the price of the floating rate security. There are three basic situations:
1. If the price of a floater is equal to par, the investor's discount margin would be equal to the reset margin.
2. Due to the tendency for bond prices to converge to par as the bond reaches maturity, the investor can make an additional return over the reset margin if the floating rate bond was priced at a discount. The additional return plus the reset margin equals the discount margin.
3. Should the floating rate bond be priced above par, the discount margin would equal the reference rate less the reduced earnings.
RELATED TERMS

Par Value
The face value of a bond. Par value for a share refers to the ... 
FloatingRate Note  FRN
A note with a variable interest rate. The interest rate is usually ... 
Reset Margin
The difference between the interest rate of a security and the ... 
Floater
A bond or other type of debt whose coupon rate changes with market ... 
Reference Rate
An interest rate benchmark upon which a floatingrate security ... 
Earned Premium
The amount of total premiums collected by an insurance company ...
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