Question

1. The US Treasury announces its intent to auction $15 billion par value of 26-week Treasury bills. It
receives $5 billion of non-competitive bids. The competitive bids received are as follows:

Price Per $1 of Par	Par Value
0.9200	$3 billion
0.9170	$4 billion
0.9140	$5 billion
0.9110	$4 billion
0.9100	$3 billion

What is the revenue that the Treasury could have generated (in billions)? Round your answer to 2 decimal points.

1.B. If the security auctioned above was Canada Government bond, what would be the revenue of the auction? Round your answer to 2 decimal points.

Answer 1

The amount that will be allocated to competitive bidders will be $15-$5 billion = $10billion. Since non-competitive bids amount to $5 billion that would make 0.9140( Corresponding to $5billion) the lowest price accepted for all bidders and all bidders would pay that price.

The revenue to treasury will be $15 billion * 0.9140 = $13.71 Billion

1B

All non competitive bidders will receive what they are bidding for and so will the competitive bidders, who offered 0.9200 and 0.9170. Of the bidders, who has offered 0.9140, each will get 3/5 if they bid