US tresury bills auctions and IPO

Question 1

What are the two markets Of US treasury bills

Answer 1

Primary market: Treasury and investors

Secondary market: bills, notes and bonds that are exchanged between investors

Question 2

What are the types of bids in the US bills auctions

Answer 2

Non-competitive bids: generally made by small investors and individuals

• guaranteed to receive amount asked
• closes on the day of the auction

Competitive bids: made by primary dealers

• bidders are not guaranteed to be served the amount they ask

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Question 3

What is an Initial Public Offerings (IPO)

Answer 3

It’s when a company goes public: its shares are listed by an exchange and anyone can buy or sell them.

Question 4

How do you determine the price of an IPO

Answer 4

By using the underwritters: they set price targets for the shares and they approach investors and brokers for the initial sale of the shares.

But, the risk of mispricing is great

Question 5

Why does many IPO’s sell at a discount

Answer 5

1. because of the winners curse
2. sell at a discount to cater to clients
3. sell at a low price to have control over who gets allocated shares

Question 6

Can we use IPO’s with an auction

Answer 6

Altough it is not very popular some still do it. The advantage here is that you are selling share’s at the right price. There is no overpaying or under