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 climate at Long-Term during the Russian financial crisis?
(a) Nervous.
(b) Confident.
(c) Standard.
(d) Excited.

2. In 1998, who published Meriwether's letter to his clients?
(a) The New Yorker.
(b) Bloomberg.
(c) The Financial Times.
(d) The New York Times.

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

4. What put pressure on the currency in Brazil?
(a) Goldman's bought out China's debt.
(b) Moody's downgraded Brazilian debt.
(c) The United State balanced the budget.
(d) Warren Buffet paid off Brazilian debt.

5. On what date did Russia declare a debt moratorium?
(a) July 4.
(b) August 31.
(c) September 30.
(d) August 17.

6. In 1998, what act led Long-Term to a fall?
(a) Putting money into Italy.
(b) Shorting the U.S. market.
(c) Shorting the Russian market.
(d) Investing in the Asian market.

7. How much money did Chase loan Long-Term so that they could continue to clear trades?
(a) $10 million.
(b) $752 million.
(c) $5 million.
(d) $475 million.

8. What did the Fed Chairman want to remove in an effort to create liquidity in the market?
(a) Margin rules.
(b) Trading rules.
(c) Stock rules.
(d) Short rules.

9. What did Long-Term think about the financial crisis that hit in August of 1998?
(a) It was serious and would not recover.
(b) It was not serious but would not recover.
(c) It was serious but would recover.
(d) It was not serious.

10. Who was withdrawing from the hedge fund markets?
(a) Small investment firms.
(b) Large investment firms.
(c) Long-Term.
(d) Foreign countries.

11. When markets get jumpy, what begins to rise?
(a) Option prices.
(b) The price of gold.
(c) Real estate.
(d) All of these.

12. What determines the swap rate in a country?
(a) Interest rates on government debt.
(b) The price of oil.
(c) Interest rates on the real estate market.
(d) The price of corn.

13. Who threatened to stop clearing the trades at Long-Term if their fund fell below a particular amunt?
(a) Bear Sterns.
(b) Goldman Sachs.
(c) Fidelity.
(d) Chase.

14. In a letter to clients, to what did Long-Term attribute the decrease in profits?
(a) Foolish investments.
(b) Widening spreads.
(c) Irresponsibility in foreign nations.
(d) Poor margins.

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

Short Answer Questions

1. To create a paired-share, what is common stock partnered with?

2. What resource close to Long-Term began to experience financial difficulties following the financial problems in Russia?

3. What did Scholes and Merton think of some of the private trades Long-Term made in 1998?

4. What companies were selling bonds for Russia?

5. After the financial crisis in Russia, what did Long-Term regret?

(see the answer keys)

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