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. In the mid-1990's, what was the ratio of leverage on Wall Street?
(a) 10-1.
(b) 100-1.
(c) 45-1.
(d) 25-1.

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

3. What was the first horrible month Long-Term had?
(a) It never had a horrible month.
(b) August, 1998.
(c) July, 1998.
(d) June, 1998.

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

5. What award did Merton and Scholes win for economics?
(a) The Academy Award.
(b) None of these.
(c) The Wall Street Trust.
(d) The Nobel Prize.

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

7. Who did Long-Term threaten to sue, following a threat not to clear trades?
(a) Waterhouse Cooper.
(b) Bear Sterns.
(c) Chase.
(d) ING trading.

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

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

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

11. Who was the Fed Chairman in 1997?
(a) Madeleine Albright.
(b) Warren Buffet.
(c) Alan Greenspan.
(d) Hillary Clinton.

12. Why was Long-Term unable to get out of the situation with Russia?
(a) They did not want to.
(b) Russia would not let them.
(c) Their investments were not liquid.
(d) They had too much money.

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

14. What was Long-Term's signature trade?
(a) The "shining cat".
(b) The "equity vol".
(c) The "small build".
(d) The "mort up".

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

Short Answer Questions

1. What did the Fed Chairman want to remove in an effort to create liquidity in the market?

2. Once crisis hit, how many weeks did it take for the partners to lose $3.6 billion?

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

4. What put pressure on the currency in Brazil?

5. What trading date dropped Long-Term below $1 billion in equity?

(see the answer keys)

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