The question is about finance

timer Asked: Jan 27th, 2021

Question Description

Institutional investors (II) submit the following bids in an Australian Treasury bonds discriminatory auction. The announcement mentions a $200,000,000 face value issue.

II1 bids yield 1.070 %and volume $70,000,000 face value

II2 bids yield 1.075 % and volume $59,500,000 face value

II3 bids yield 1.080 % and volume $100,000,000 face value

II4 bids yield 1.075 % and volume $30,500,000 face value

On a scrap paper, draw the diagram of the demand and supply in this auction. Indicate clearly in your diagram the cut-off rate, the winners, the losers and the additional demand and remaining supply at the cut off yield. Then use your draft to fill the following multiple blanks. The scrap paper will not be uploaded but needs to be kept for future reference.

The aggregate cumulative demand at 1.075% is [A]. Do not type the $ symbol.

There is a market clearing yield [B]. Type Y if true and N if incorrect

The cut off yield of the auction is [C] %. Do not type the % symbol

The remaining supply after serving the bidders who receive their bids in full is [D]. Do not show the calculation only the result.

The ratio of their bids that the winners with the highest accepted yield receive is [E]. Do not show the calculation only the result. Express your result with 3 numbers after the decimal point.

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