The Commonwealth Government has announced a $500 million Treasury bond issue by competitive tender. The 10-year bonds have a fixed coupon of 6.50 per cent per annum. The Reserve Bank plans to take $100 million of the allocation and the remaining $400 million will be allocated according to bids received. The following bids are received: 

Bank A $150 million Yield 6.75% p.a. 

Bank B $150 million Yield 6.70% p.a. 

Bank C $175 million Yield 6.80% p.a. 

Bank D $250 million Yield 6.50% p.a. 

Bank E $100 million Yield 8.50% p.a. 

Allocate the competitive bids. At what yield will the Reserve Bank obtain its $100 million allocation?

Answer rating: 100% (QA)

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