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

2. When Meriwether increased his position in Treasury futures, what did he expect the market to do?
(a) Collapse.
(b) Drop substantially.
(c) Perform typically.
(d) Rise sharply overnight.

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

4. In 1996, Long-Term was four times as large as what?
(a) The U.S. Treasury.
(b) The largest hedge fund.
(c) The Mexican Treasury.
(d) A small European country.

5. Michael Steindardt believed what was the "culprit in 1994"?
(a) Leverage.
(b) Foolish investments.
(c) Wealth.
(d) Poverty.

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

7. What did Black and Scholes use to calculate market change?
(a) History.
(b) Calculus and computer models.
(c) Meriwether's advice.
(d) In depth financial patterns.

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

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

10. In the 1970's, what type of trading was considered dull?
(a) Gasoline.
(b) Bond.
(c) Securities.
(d) Corn.

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

12. In 1996, the first bank Long-Term approached regarding credit deemed Long-Term as what?
(a) Greedy.
(b) A great investment.
(c) Brilliant.
(d) Too risky.

13. Who developed the Black-Scholes model?
(a) John Meriwether.
(b) Myron Scholes.
(c) David Black.
(d) Jack Salomon.

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

15. Who gains from working with hedge funds?
(a) Impoverished countries.
(b) The government.
(c) Women.
(d) Managers.

Short Answer Questions

1. In 1996, who did Long-Term first approach to handle their credit?

2. What type of strategy did Long-Term employ?

3. What year did Meriwether hire Myron Scholes?

4. In order for Meriwether's Treasury futures investment to work, what did he need market prices to do?

5. What did the letter Meriwether sent to his clients claim it was difficult to do with Long-Term?

(see the answer keys)

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