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In a Treasury auction of $2.1 billion par value 91-day T-bills, the following bids were submitted:...

In a Treasury auction of $2.1 billion par value 91-day T-bills, the following bids were submitted:

Bidder

Bid Amount

Price

1

$500 million

$0.9940

2

$750 million

$0.9901

3

$1.5 billion

$0.9925

4

$1 billion

$0.9936

5

$600 million

$0.9939

If only these competitive bids are received, who will receive T-bills, in what quantity, and at what price?

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Answer #1

Bidder 1 will be given first preference for bid amount $500 million, as his bid was for the highest price.

Bidder 2 has the lowest bid price and shall be ignored

Bidder 3 has also low bid price and shall be ignored

Bidder 5 will receive $600 million, as his bid price was the second highest.

Bidder 4, the remaining amount is for $1 billion, he will receive the T-bills.

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