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

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

3. What was the leverage of Long-Term, following its meeting with the Fed?
(a) 10-1.
(b) 100-1.
(c) 25-1.
(d) 50-1.

4. What did Long-Term avoid by working with derivatives instead of stocks?
(a) Fees.
(b) Profit.
(c) Disclosure.
(d) Outside interest.

5. Where did the private contracts Long-Term made in 1998 trade?
(a) Privately.
(b) On the exchange.
(c) Overseas.
(d) In Russia.

6. When did Long-Term start losing money?
(a) When the Asian market collapsed.
(b) When Warren Buffet spoke out against Long-Term.
(c) When arbitrage operations were suspended.
(d) When Meriwether opened a new company.

7. How many banks stepped forward to help bail out Long-Term?
(a) 20.
(b) 30.
(c) 16.
(d) 2.

8. After the first bad year experienced by Long-Term, what did its overall record look like?
(a) Fantastic.
(b) Typical.
(c) Terrible.
(d) Mediocre.

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

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

11. What was the credit limit on hedge funds?
(a) $50 million.
(b) $1 billion.
(c) $100 million.
(d) There wasn't one.

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

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

14. What did the incident on August 21 cost Long-Term?
(a) $1 billion.
(b) $2 billion.
(c) $200 million.
(d) $150 million.

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

Short Answer Questions

1. If the Long-Term fund failed, what would counter parties have to do?

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

3. In a letter to clients, to what did Long-Term attribute the decrease in profits?

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

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

(see the answer keys)

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