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. In 1996, what was the response of most of the banks in terms of offering credit financing to Long-Term?
(a) Interested.
(b) Competitive.
(c) Interested but wary.
(d) Eager.

2. Where was Robert C. Merton working when Meriwether hired him?
(a) The Federal Exchange Commission.
(b) Harvard.
(c) NASA.
(d) Wall Street.

3. What models did Long-Term follow?
(a) Value-at-Risk.
(b) All of these.
(c) Black-Scholes.
(d) Merton.

4. What did Meriwether do with his staff?
(a) Play golf.
(b) Dine.
(c) Travel.
(d) All of these.

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

6. What is the method of paying a percentage of a bond called?
(a) A haircut.
(b) A percentage price.
(c) A trim.
(d) A bond fee.

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

8. During the time period in "Hedge Fund", how many people were millionaires due to the stock market?
(a) 6 million.
(b) 5 million.
(c) 20 million.
(d) 1 million.

9. How long did Long-Term expect their investors to commit?
(a) 3 years.
(b) 1 year.
(c) 6 months.
(d) 3 months.

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

11. How much of the face value of a bond do buyers typically pay?
(a) 1%.
(b) 15%.
(c) 25%.
(d) 10%.

12. How was Meriwether's career affected following the Treasury bill deal?
(a) He was made partner.
(b) He became a regulation advocate.
(c) He lost his job.
(d) He became a public speaker.

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

14. In bond trading, what are loans backed by collateral called?
(a) Fair financing.
(b) Exclusive trades.
(c) Repo financing.
(d) Mini trades.

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

Short Answer Questions

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

2. How much did banks and investors make in conjunction with Long-Term?

3. Why did Long-Term trade in Italy?

4. What did banks and investors want from Long-Term?

5. What financial crisis did Long-Term make it through that most of the market didn't?

(see the answer keys)

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