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 want to do for investors?
(a) Build trust.
(b) Make money.
(c) All of these.
(d) Limit risk.

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

3. Who typically invested in hedge funds?
(a) The general population.
(b) Foreign banks.
(c) The Federal Reserve.
(d) A club of exclusive investors.

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

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

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

7. What did Long-Term do with off-the-run bonds?
(a) Avoid them.
(b) Loan them to other firms.
(c) Unload them quickly.
(d) Hold them for profit.

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

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

10. What did Meriwether warn his investors against in 1994?
(a) Not investing enough with Long-Term.
(b) A repeat performance.
(c) His early retirement.
(d) Further growth.

11. In order for Meriwether's Treasury futures investment to work, what did he need market prices to do?
(a) Remain the same.
(b) Converge.
(c) Fluctuate drastically.
(d) None of these.

12. Once in business, what did Long-Term have an easy time getting from banks?
(a) Workers.
(b) Personal information.
(c) Endorsements.
(d) Money.

13. In 1996, how much did Long-Term have in assets?
(a) $120 million.
(b) $1 billion.
(c) $140 billion.
(d) $500 million.

14. What did the letter Meriwether sent to his clients claim it was difficult to do with Long-Term?
(a) Get a job.
(b) Lose money.
(c) Make money.
(d) Take legal action.

15. What was J.F. Eckstein & Co. primarily working on in 1979?
(a) Treasury Bill futures.
(b) Stocks.
(c) IO's.
(d) Bonds.

Short Answer Questions

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

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

3. Where was the London office for Long-Term located?

4. Why did Long-Term trade in Italy?

5. What was practically impossible to determine about Long-Term?

(see the answer keys)

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