medium · Debt Capital Markets
An investor buys an FRN at 95.00 with a QM of 250 bps. At the end of the first year, the bond's price has risen to 96.00.
If all other factors remain constant, how has the Discount Margin (DM) changed?
- The DM has decreased (tightened).
- The DM has increased (widened).
- The DM remained at 250 bps because the QM is fixed.
- The DM increased by 100 bps due to the price move.
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