Determine the cut-off yield of the tender above

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During a tender for the issuance of Australian government bonds, the cumulative aggregate demand by bidders is the following:

Yield

Total cumulative aggregate demand (in AUD million face value)

1.20%

1,200

1.15%

1,050

1.10%

950

1.05%

900

1.00%

820

The Australian government is intending to sell AUD million 1,000 face value bonds using a variable discriminatory tender. The money of the issue will be paid on the Australian government account in Top Bank, an Australian commercial bank.

  1. Show the effect of this tender on the Australian government's balance sheet if the tender is successful.
  2. Determine the cut-off yield of the tender above. Explain in details the process you have followed to select the cut off yield.
  3. Calculate the ratio that will be used to calculate the allocation of government bonds to the bidders who bid the cut-off yield. Explain in details the process you have followed to calculate the ratio.

Reference no: EM133109599

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