he US government announced an auction of $10 million in 43-day T-Bills. They received non-compeitive bids for $3 million The compeititve bids were as follows : Amount Bid rates Cumulative Dealer A $2 million 1.75% 2 Dealer B $1 million 1.85% 3 Dealer C $0.5 million 1.90% 3.5 Dealer D $3 million 2.05% 6.5 Dealer E $2.5 million 2.15% 9 Dealer F $1.5 million 2.25% 10.5 Dealer G $2.75 million 2.30% 13.25 Dealer H $1.75 million 2.40% 15 At what interest rate will the auction be cleared? 1.85% 2.05% 2.15% 2.40%
he US government announced an auction of $10 million in 43-day T-Bills. They received non-compeitive bids for $3 million The compeititve bids were as follows : Amount Bid rates Cumulative Dealer A $2 million 1.75% 2 Dealer B $1 million 1.85% 3 Dealer C $0.5 million 1.90% 3.5 Dealer D $3 million 2.05% 6.5 Dealer E $2.5 million 2.15% 9 Dealer F $1.5 million 2.25% 10.5 Dealer G $2.75 million 2.30% 13.25 Dealer H $1.75 million 2.40% 15 At what interest rate will the auction be cleared? 1.85% 2.05% 2.15% 2.40%
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
Related questions
Question
| he US government announced an auction of $10 million in 43-day T-Bills. | ||||||
| They received non-compeitive bids for $3 million | ||||||
| The compeititve bids were as follows : | ||||||
| Amount | Bid rates | Cumulative | ||||
| Dealer A | $2 million | 1.75% | 2 | |||
| Dealer B | $1 million | 1.85% | 3 | |||
| Dealer C | $0.5 million | 1.90% | 3.5 | |||
| Dealer D | $3 million | 2.05% | 6.5 | |||
| Dealer E | $2.5 million | 2.15% | 9 | |||
| Dealer F | $1.5 million | 2.25% | 10.5 | |||
| Dealer G | $2.75 million | 2.30% | 13.25 | |||
| Dealer H | $1.75 million | 2.40% | 15 | |||
| At what interest rate will the auction be cleared? | ||||||
|
1.85% |
||
|
2.05% |
||
|
2.15% |
||
|
2.40%
|
Expert Solution
Step 1
The government holds a weekly electronic bill auction via which Treasury bills are issued. The public, including institutional and individual investors, may participate in the bill auction, and principal dealers—financial institutions and brokerages—must do so. There are two types of participants: competitive bidders and non-competitive bidders. The discount rate to be paid on each T-bill issue is decided through competitive bidding. Non-competitive bids are ensured to receive their securities, but they are obligated to pay the price determined by the competitive offers.
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