Question

Table 1 Bidder Bid Amount Price $1,000 $877 S0.9920 S0.9960 $653 S0.9931 $978 S0.9970 $783 S0.9919 1. The Treasury Department wants to raise S2,650 by selling Treasury bills in an auction The amount of non-competitive bids equals $703. What is the prevailing price in the auction in Table 1? A. S0.9920 B. $0.9960 C. $0.9931 D. S0.9970 E.$0.9919 2. Which competitive bidders were able to buy Treasury bills in Table 1? A. 4 B. 4,2 C. 4, 2, 3 D. 4,2, 3,1 E. 4, 2,3, 1,5

Answer for 1 is C and 2 is C, please show and explain how to get it!

Answer 1

Amount to be raised is 2650-703=1947

We sort the table in increasing order of prices

Bid Price

978 0.9970

877 0.9960

653 0.9931

1000 0.9920

783 0.9919

1.

We see from the highest price and go below till the amount 1947 is reached

Hence, we have to go in 3rd row as 978+877+653=2508

So Price is 0.9931 of 3rd row

2.

All the bidders of 1st 2nd and 3rd row i.e., 4,2,3