total margin 100(100- 99.90031 )   100 = ------------------------------------------------------- + 45 + 100(100- 99.90031 )0.05 0.9583 ------------------------ 99.90031 = 55.957 basis points     In Exhibit 7.1, Bloombergs adjusted total margin is 55.957 which is obtained from the "MARGINS" box.   Discount Margin One common method of measuring potential return that employs dis- counted cash flows is discount margin. This measure indicates the aver- age spread or margin over the reference rate the investor can expect to earn over the securitys life given a particular assumption of the path the reference rate will take to maturity. The assumption that the future lev- els of the reference rate are equal to todays level is the usual assump- tion. The procedure for calculating the discount margin is as follows:   Step 1. Determine the cash flows assuming that the reference rate does not change over the securitys life. Step 2. Select a margin. Step 3. Discount the cash flows found in Step 1 by the current value of the reference rate plus the margin selected in Step 2. Step 4. Compare the present value of the cash flows as calculated in Step 3 to the price. If the present value is equal to the securitys price, the discount margin is the margin assumed in Step 2. If the present value is not equal to the securitys price, go back to Step 2 and select a different margin.   For a security selling at par, the discount margin is simply the quoted margin. For example, suppose that a 6-year floater selling for $99.3098 pays the reference rate plus a quoted margin of 80 basis points. The coupon   resets every six months. Assume that the current value of the reference rate is 10%. Exhibit 7.2 presents the calculation of the discount margin for this secu- rity. Each period in the securitys life is enumerated in Column (1), while Col- umn (2) shows the current value of the reference rate. Column (3) sets forth the securitys cash flows. For the first 11 periods, the cash flow is equal to the