The Bank of Bermuda recently issues $1.3 billion of 98-day treasury bills on behalf of the federal government. The average bid received for the auction implied a yield of 3.114 percent.
a. How much money was raised for the federal government?
b. The high bid received implied a yield of 2.919 percent. If this were the average bid, how much more money would the Bank of Bermuda have raised?
c. The low big received implied a yield of 3.254 percent. If this were the average bid, how much less money would the Bank of Bermuda have raised?
d. Based on the above analysis, what is the direct impact on the federal government when the Bank of Bermuda changes the overnight rate?
Please see attachment for answers for questions a., b., and c.
d) Thus we can see that as the central bank (Bank of Bermuda), raises interest rates, the cost to ...
The solution looks at the Bank of Bermuda's recently issued treasury bills and determines how much money was raised for the federal government, the increase or decrease of money raised based on the type of bid, and the direct impact the federal government would have when the Bank of Bermuda changes the overnight rate.