When Genius Failed Test | Mid-Book Test - Easy

Roger Lowenstein
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This test consists of 15 multiple choice questions and 5 short answer questions.

Multiple Choice Questions

1. What financial crisis did Long-Term make it through that most of the market didn't?
(a) The U.S. crisis.
(b) The Mexican crisis.
(c) The Switzerland crisis.
(d) The Germany crisis.

2. In 1994, what market did Long-Term begin to express an interest in?
(a) Chicago.
(b) Chinese.
(c) International.
(d) Local.

3. What type of government paper was bought in Italy?
(a) Italian money.
(b) Deeds to monuments.
(c) Floating rate.
(d) Fluctuating rate.

4. What did Long-Term want to do for investors?
(a) Build trust.
(b) All of these.
(c) Limit risk.
(d) Make money.

5. What company was Kapor the founder of?
(a) Circuit Finance, Inc.
(b) Finance Development International.
(c) Lochfield Growing Corporation.
(d) Lotus Development Corporation.

6. What did the banks and investors use to estimate Long-Term's assets?
(a) Their exposure.
(b) Net worth of investors.
(c) All of these.
(d) History of investments.

7. Once in business, what did Long-Term have an easy time getting from banks?
(a) Money.
(b) Workers.
(c) Endorsements.
(d) Personal information.

8. Where was the Long-Term Capital Portfolio stored?
(a) Germany.
(b) Bermuda.
(c) Cayman Islands.
(d) Switzerland.

9. What was Meriwether's team allowed to do, following the Treasury bill deal?
(a) Spread trades.
(b) Set Treasury standards.
(c) Coach the office.
(d) Vacation in Italy.

10. Why did Long-Term trade in Italy?
(a) It was a safe market.
(b) The opportunity for big returns.
(c) Meriwether was Italian.
(d) The tax write-off opportunity.

11. How much did the accounts for investors increase in 1994?
(a) 50%.
(b) 20%.
(c) 10%.
(d) 5%.

12. In 1996, who did Long-Term first approach to handle their credit?
(a) Bank of America.
(b) Chase.
(c) Citibank.
(d) Washington Mutual.

13. In 1996, Long-Term was two and a half times larger than what company?
(a) Chase.
(b) Fidelity Magellan.
(c) Bank of America.
(d) Lehman Brothers.

14. In 1996, how much did Long-Term have in assets?
(a) $120 million.
(b) $500 million.
(c) $140 billion.
(d) $1 billion.

15. In 1996, what was Long-Term seeking from the bank that would handle their credit?
(a) Legitimacy.
(b) Asset storage.
(c) Tax shelter.
(d) Cash flow.

Short Answer Questions

1. Meriwether was threatened with what, if his Treasury bill deal did not pan out?

2. Who helped Meriwether raise money for Long-Term?

3. What models did Long-Term follow?

4. What did the Black-Scholes model believe was constant?

5. In 1996, what was the response of most of the banks in terms of offering credit financing to Long-Term?

(see the answer keys)

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