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

2. What is the CFTC short for?
(a) Counting Futures Trading Commodities.
(b) Commodities Finding True Commission.
(c) Commodities Futures Trading Commission.
(d) Capitalism Fortune Trust Commonwealth.

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

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

5. What did a dealer from J.F. Eckstein & Co. want from Meriwether in 1979?
(a) Help.
(b) Real estate tips.
(c) Empathy.
(d) A better financial model.

6. What were the models Long-Term used unable to predict?
(a) Long-Term's exact income.
(b) All of these.
(c) Market collapse.
(d) Investor's exact return.

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

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

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

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

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

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

13. Who charged Long-Term much lower fees than other clients?
(a) NYSE.
(b) Brokerage firms.
(c) The Federal Reserve.
(d) The hospitality industry.

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

15. Who did most funds have to be registered with?
(a) CFTC.
(b) Most funds did not have to be registered.
(c) SEC.
(d) The Fed.

Short Answer Questions

1. What year did Meriwether hire Myron Scholes?

2. Meriwether believed that risk and volatility were what?

3. How long did Long-Term expect their investors to commit?

4. In 1996, how much did Long-Term have in assets?

5. Where was David W. Mullins working when Meriwether hired him?

(see the answer keys)

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