Answer :
Final answer:
In the T-bill auction process, the competitive bidder is guaranteed a maximum price; they will not pay more than their bid, but there is no guarantee about the minimum price as it will depend on the auction dynamics hence, answer is b. Maximum price; minimum price.
Explanation:
During the T-bill auction process, a competitive bidder specifies the price they are willing to pay and the quantity they wish to purchase. Although the competitive bidder specifies a maximum price, there is no guarantee that they will receive the T-bill, as they could be outbid by others. The competitive bidder is essentially guaranteed a maximum price — they will not have to pay more than what they bid. Auction dynamics ensure that competitive bids, which are sealed, will generally wind up being filled at a price close to but no higher than the second-highest bid submitted, assuming the bid is above the reserve price (minimum price acceptable).
In contrast, non-competitive bidders agree to accept the price determined at auction, which guarantees that they will receive the T-bill but does not ensure the price will be at a minimum or maximum. Therefore, the correct answer is b. Maximum price; minimum price, as the competitive bidder sets the highest price they are willing to pay but does not determine the actual selling price, which may be lower than their maximum depending on the other bids received. The final price paid is between the second-highest bid and the second-highest bid minus the bid increment.