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CFA Level I · CFA Level I Exam · Fixed-Income Issuance and Trading

A government issues bonds through a single-price auction. Bidders submit competitive bids with yields, and the lowest yields are accepted first until the issue is fully allocated. The highest accepted yield is 4.10%. Under a single-price auction, a successful bidder who bid 4.02% most likely receives bonds at a yield of:

The successful bidder most likely receives bonds at a yield of 4.10%. In a single-price auction, all accepted bidders get the same yield, the stop-out yield, which is the highest accepted yield. Receiving one's own bid yield describes a multiple-price auction.

  1. A4.02%
  2. B4.06%
  3. C4.10%Correct

Explanation

In a single-price (Dutch) auction, all successful bidders receive the same price, determined by the stop-out, which is the highest accepted yield of 4.10%. Paying the bid yield of 4.02% would be a multiple-price (American) auction. The 4.06% option is an unsupported average.

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