When Genius Failed Test | Final 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 was the leverage of Long-Term, following its meeting with the Fed?
(a) 50-1.
(b) 25-1.
(c) 10-1.
(d) 100-1.

2. By the end of August 1998, what market had practically stopped trading altogether?
(a) Bond markets.
(b) Stock markets.
(c) International markets.
(d) Gold markets.

3. What regulation did Long-Term bypass when trading equities?
(a) Regulation-B.
(b) Regulation-T.
(c) Regulation-C.
(d) Regulation-E.

4. What are some of the new markets Long-Term looked into in 1997?
(a) Paired-shares.
(b) Equities.
(c) Stocks.
(d) All of these.

5. In 1998, what type of contracts did Long-Term make with private entities?
(a) Liquid.
(b) Illegal.
(c) Short-term.
(d) Long-term.

6. What was the limitation on borrowing for equity trading?
(a) 10%.
(b) 40%.
(c) 50%.
(d) 25%.

7. Once the financial market in Russia collapsed, what did people stop trading?
(a) Commodities.
(b) Corn.
(c) Stocks.
(d) Bonds.

8. What was the common belief regarding nuclear powers?
(a) They are not stable.
(b) They never default.
(c) They always default.
(d) They do not have capital.

9. What year was the Federal Reserve System created?
(a) 1901.
(b) 1913.
(c) 1950.
(d) 1995.

10. What companies were selling bonds for Russia?
(a) Black market traders.
(b) All of these.
(c) Mom and pop establishments.
(d) Investment banking firms.

11. What notable player was on vacation during the crisis in Russia?
(a) Warren Buffet.
(b) The president of the United States.
(c) The president of Russia.
(d) Alan Greenspan.

12. How did regulators respond to the involvement of banks in the derivatives market?
(a) There were not concerned.
(b) They encouraged it.
(c) They were delighted.
(d) They were worried.

13. In 1998, Long-Term expected prices to do what?
(a) Rise.
(b) Stay the same.
(c) Fall.
(d) Fluctuate.

14. In 1996, why was it difficult to continue to find strong profits in arbitrage trades?
(a) It was illegal to perform these trades.
(b) The market was over-saturated.
(c) Long-Term did not have investment capital.
(d) The market did not have enough players.

15. What word did people often use to describe Long-Term?
(a) Stupid.
(b) Dangerous.
(c) Genius.
(d) Communist.

Short Answer Questions

1. In 1998, what market did Long-Term bet would decline?

2. On what date did Russia declare a debt moratorium?

3. When Long-Term met with the Fed, it was obvious they did not have enough money to make it through what?

4. In the mid-1990's, what was the ratio of leverage on Wall Street?

5. What did Long-Term risk losing if they allowed their assets to fall below five hundred million dollars?

(see the answer keys)

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