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Calculate the volume weighted average winning yield

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Reference no: EM133111368

Consider the following bids by 9 institutional investors (II): 

Yield in the bid

Quantity in the bid (AUD million face value)

1.20%

II1:100; II2: 50

1.15%

II3: 40; II4: 60

1.10%

II5: 30; II6: 20

1.05%

II7: 80

1.00%

II8: 420; II9: 400

1. Determine the quantity of government bonds allocated to each institutional investor. Justify your answers.

2. Calculate the volume weighted average winning yield of the tender.

3. Assume that II8 is Top Bank itself, the bank in which the Australian government has an account. Assume that II9 is Bottom Bank, another Australian commercial bank. Represent the effect of this tender on the balance sheet of Top Bank and the balance sheet of Bottom Bank. Explain the reasons for the balance sheets changes.

Reference no: EM133111368

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