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 was practically impossible to determine about Long-Term?
(a) Why it was doing so well.
(b) Actual fund assets.
(c) Who was in charge.
(d) Where it was located.

2. What did Long-Term do when IOs started to fall?
(a) Buy them up.
(b) Explain the situation to investors.
(c) Sell their shares.
(d) Lie to investors.

3. In 1996, what was the second bank Long-Term approached about financing their credit?
(a) National Bank of Russia.
(b) The Italian Republic of Banks.
(c) Union Bank of Switzerland.
(d) International Banking System.

4. What did Rosenfeld and his friend develop?
(a) Software.
(b) Energy drinks.
(c) Energy bars.
(d) A financial museum.

5. What happened to Meriwether's Treasury bill deal before it was resolved?
(a) Huge gains.
(b) Big losses.
(c) It remained steady.
(d) It fell apart.

6. What did the traders accept about the financial models they used?
(a) They were smarter than humans.
(b) They removed the element of surprise.
(c) They were expensive.
(d) They were imperfect.

7. What notable company went bankrupt in the 1970's?
(a) Penn Central Railroad.
(b) Penn Weapons Industry.
(c) Penn Coal.
(d) Penn North Distillery.

8. What was the end result of Meriwether's Treasury bill deal?
(a) It lost a lot of money.
(b) It frightened his colleagues.
(c) It made a lot of money.
(d) It was not a notable deal.

9. In 1993, what was happening more than usual in America?
(a) Day trading.
(b) Starvation.
(c) Bankruptcy.
(d) Refinancing.

10. Who helped Meriwether raise money for Long-Term?
(a) Warren Buffet.
(b) Salomon Brothers.
(c) Merrill Lynch.
(d) No one.

11. What did the Black-Scholes model believe was constant?
(a) Growth.
(b) Meriwether's enthusiasm.
(c) Income.
(d) Volatility.

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

13. How many employees were with Long-Term in 1996?
(a) A couple dozen.
(b) Five hundred.
(c) Less than a dozen.
(d) Five.

14. In 1994, why did the price of bonds drop?
(a) Property value went down.
(b) There was too much wealth in America.
(c) The Fed raised interest rates.
(d) The Fed lowered interest rates.

15. What affected bond trading in the 1970's?
(a) The democratic elections.
(b) The Vietnam War.
(c) The price of commodities.
(d) The international monetary crisis.

Short Answer Questions

1. Once in business, what did Long-Term have an easy time getting from banks?

2. In 1996, Long-Term was two and a half times larger than what company?

3. Meriwether believed that risk and volatility were what?

4. How much money did Meriwether need to start Long-Term?

5. In bond trading, what are loans backed by collateral called?

(see the answer keys)

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