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, Long-Term had achieved thirty times its what?
(a) Starting capital.
(b) Proposed value.
(c) Original goal.
(d) Debt capacity.

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

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

4. What hedge fund caused a pound devaluation in Europe but made over a billion dollars?
(a) Treasury Fund.
(b) Millenium Fund.
(c) Endowment Fund.
(d) Quantum Fund.

5. Who ran the London office for Long-Term?
(a) Meriwether.
(b) Mullins.
(c) Haghani.
(d) Buffet.

6. Meriwether believed that risk and volatility were what?
(a) Quantifiable.
(b) Unmanagable.
(c) Abstract ideas.
(d) A part of life.

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

8. What did banks and investors want from Long-Term?
(a) Client referrals.
(b) To be involved.
(c) It to shut down.
(d) Regulation.

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

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

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

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

13. Where was David W. Mullins working when Meriwether hired him?
(a) Salomon Brothers.
(b) Federal Reserve.
(c) Yale School of Finance.
(d) The United Nations.

14. How much money did Long-Term earn in 1996?
(a) $2.1 billion.
(b) $1 billion.
(c) $500 million.
(d) $100 million.

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

Short Answer Questions

1. In 1996, what was the second bank Long-Term approached about financing their credit?

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

3. In 1996, the first bank Long-Term approached regarding credit deemed Long-Term as what?

4. How much money did Rosenfeld's business bring in?

5. In 1994, why did the yield raise on the thirty year Treasury bond?

(see the answer keys)

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