The Federal Reserve is offering Treasury bills with a par value of $50 billion for sale. They have received $22 billion of noncompetitive bids. The competitive bids for a $10,000 par value bond are:
$\begin{array}{cccc}
\text { dder } & \text { Pric Bid } & & \text { Oty } & \text { Bid } \
\text { A } & \$ 9,900 & \$ & 13 & \text { billion} \
\text { B } & \$ 9,850 & \$ & 9 & \text {billion } \
\mathrm{C} & \$ 9,820 & \$ & 6 & \text { billion} \
\text { D } & \$ 9,750 & \$ & 9& \text { billion}
\end{array}$

How much money will the Federal Reserve raise from this offering?

Question

The Federal Reserve is offering Treasury bills with a par value of $50 billion for sale. They have received $22 billion of noncompetitive bids. The competitive bids for a $10,000 par value bond are:
$\begin{array}{cccc}
 \text { dder } & \text { Pric  Bid } & & \text { Oty } & \text { Bid } \
\text { A } & \$  9,900 & \$ & 13 & \text { billion} \
 \text { B } & \$  9,850 & \$ & 9 & \text {billion } \
 \mathrm{C} & \$  9,820 & \$ & 6 & \text { billion} \
 \text { D } & \$  9,750 & \$ & 9& \text { billion}
\end{array}$

How much money will the Federal Reserve raise from this offering?

Quizplus · Accepted Answer

The Federal Reserve will accept all $22 billion of noncompetitive bids. For competitive bids, they will accept $28 billion to reach the $50 billion total. The highest price accepted will be $9,820 (Bid C), as it fills the remaining $28 billion. The total raised is $22 billion + ($13 billion * $9,900/$10,000) + ($9 billion * $9,850/$10,000) + ($6 billion * $9,820/$10,000) = $49.10 billion.

The Federal Reserve Is Offering Treasury Bills with a Par