The Federal Reserve is offering Treasury bills with a par value of $10 billion for sale.They have received $3 billion of noncompetitive bids.The competitive bids for a $10,000 par value bond are: (Qty in billions) How much money will the Federal Reserve raise from this offering?

Question

The Federal Reserve is offering Treasury bills with a par value of $10 billion for sale.They have received $3 billion of noncompetitive bids.The competitive bids for a $10,000 par value bond are: (Qty in billions)  How much money will the Federal Reserve raise from this offering?

Quizplus · Accepted Answer

Amount available to competitive bidders = $10b − $3b = $7b
Lowest acceptable bid price is $9,850, which is Bidder B.
Amount raised = $10b × ($9,850/$10,000) = $9.85b

The Federal Reserve Is Offering Treasury Bills with a Par