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Allocate the competitive bids

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Question - The Commonwealth Government has announced a $500 million Treasury bond issue by competitive tender. The 10-year bonds have a fixed coupon of 6.5% per annum.  The Reserve Bank plans to take $100 million of the allocation, and the remaining $400 million will be allocated according to the bids received.  The electronic bidding system has received the following bids:

Bank A

$100 million

Yield 6.75% per annum

Bank B

$150 million

Yield 6.70% per annum

Bank C

$120 million

Yield 7.25% per annum

Bank D

$175 million

Yield 6.50% per annum

Bank E

$250 million

Yield 6.90% per annum

Bank F

$100 million

Yield 7.50% per annum

Required -

a. Allocate the competitive bids. State in ascending order which bank gets the allocation and the specific amount.

b. At what yield will the Reserve Bank obtain its $100 million allocations?

Reference no: EM133108674

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