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This test consists of 15 multiple choice questions and 5 short answer questions.

Multiple Choice Questions

1. 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.

2. What type of funds gained popularity in the 1990's?
(a) Real estate.
(b) Treasury.
(c) Mutual.
(d) Value.

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

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

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

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

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

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

9. What were popular pools in 1993?
(a) Mortgage.
(b) Electricity.
(c) Oil.
(d) Green energy.

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

11. In 1996, what was the second bank Long-Term approached about financing their credit?
(a) The Italian Republic of Banks.
(b) International Banking System.
(c) National Bank of Russia.
(d) Union Bank of Switzerland.

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

13. Where was the Long-Term Capital Portfolio stored?
(a) Germany.
(b) Bermuda.
(c) Cayman Islands.
(d) Switzerland.

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

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

Short Answer Questions

1. How much money did Meriwether need to start Long-Term?

2. What unusual event happened when Meriwether began working with Treasury futures?

3. How much money did Long-Term earn in 1996?

4. Where did Meriwether work in 1979?

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

(see the answer keys)

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