Question

The Federal Reserve is offering Treasury bills with a par value of $40 billion for sale. They have received $18 billion of noncompetitive bids. The competitive bids for a $10,000 par value bond are:

Bidder	Price Bid			Qty Bid (bn)
A	$	9,825			2
B		9,815			6
C		9,800			14
D		9,700			20
How much money will the Federal Reserve raise from this offering?

Group of answer choices

$39.05 billion

$39.20 billion

$39.50 billion

$39.10 billion

$39.30 billion

Answer 1

Solution : Answer = $39.2 billion

Amount available to competitive bidders = $40 billion - $18 billion = $22 billion

Lowest acceptable bid price is $9,800, which is Bidder C.

Amount raised = $40 billion $\times$ ($9,800 / $10,000) = $39.2 billion