CFA Level I · CFA Level I Exam · Fixed-Income Markets for Government Issuers
A government auctions EUR 1,000 million of 2-year zero-coupon bills with a face value of EUR 100 each using a single-price format. Bids, in price per EUR 100 face and quantity in EUR million of face, are: Bidder X 98.00 for 400; Bidder Y 97.50 for 300; Bidder Z 97.00 for 500. Bidders are filled from the highest price down. The total cash raised by the government is closest to:
The government raises about EUR 970.0 million. Bids are filled to 1,000 million of face value, with the lowest accepted price of 97.00 as the stop-out price. In a single-price auction everyone pays 97.00 per 100, so 1,000 x 0.97 equals 970.0 million.
- AEUR 970.0 millionCorrect
- BEUR 971.0 million
- CEUR 976.5 million
Explanation
Fill X 400, Y 300, then Z 300 of its 500 to reach 1,000. The stop-out price is 97.00 and all pay it: 1,000 x 0.97 = 970.0 million. Paying own bids would give 392+292.5+291=975.5, which is the multiple-price result.
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