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

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

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

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

5. In its first bad year, what did Long-Term maintain?
(a) A strong energy.
(b) All of these.
(c) A good reputation.
(d) A great workforce.

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

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

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

9. If the Long-Term fund failed, what would counter parties have to do?
(a) Nothing.
(b) Give it money to keep going.
(c) Buy more stocks.
(d) Sell.

10. When did the Russian market begin to fail?
(a) May 1998.
(b) September 1998.
(c) August 1998.
(d) April 1998.

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

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

13. In 1996, what was Meriwether encouraging Long-Term to do?
(a) Investigate new territory.
(b) Hire new employees.
(c) Break the law.
(d) Stick with the tried and true.

14. 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.

15. At what level was the swap rate of the United States in April 1998?
(a) Medium.
(b) Non-existant.
(c) Low.
(d) High.

Short Answer Questions

1. During the financial crisis in 1998, what did the partners keep from the workers?

2. What was the internal climate at Long-Term in 1998?

3. What was the common belief regarding nuclear powers?

4. How much money did Chase loan Long-Term so that they could continue to clear trades?

5. What typically happens to stock prices when a merger is revealed?

(see the answer keys)

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