Series 7 practice questionmediumDebt Securities — US Government — Treasury Auction
In a Treasury auction, noncompetitive bidders:
- AMust specify the yield they are willing to accept
- BReceive a lower yield than competitive bidders
- CCan only bid for amounts exceeding $5 million
- DAccept whatever yield is determined by competitive bidding and are guaranteed to receive securities✓ Correct answer
Explanation
Why D — Accept whatever yield is determined by competitive bidding and are guaranteed to receive securities
Noncompetitive bidders in Treasury auctions agree to accept the yield determined by the competitive bidding process. In exchange for accepting market-determined pricing, noncompetitive bidders are guaranteed to receive their full requested amount of securities. Noncompetitive bids are limited to $10 million per auction and are popular with retail investors who want certainty of allocation.
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