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

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

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

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

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

7. During the turmoil of 1998, investors avoided Long-Term because they were trying to avoid what?
(a) Scientific trades.
(b) Long range trades.
(c) Short term trades.
(d) Exceptional trades.

8. What did Scholes and Merton think of some of the private trades Long-Term made in 1998?
(a) They did not support them.
(b) They supported them.
(c) They were impressed.
(d) They were excited.

9. Who suspended arbitrage operations in April 1998?
(a) Chase.
(b) Goldman Sachs.
(c) Salomon.
(d) Fidelity Bank and Trust.

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

11. In 1998, what market did Long-Term bet would decline?
(a) The Latin market.
(b) The Russian market.
(c) The U.S. market.
(d) The Asian market.

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

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

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

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

Short Answer Questions

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

2. After the first bad year experienced by Long-Term, what did its overall record look like?

3. What regulation did Long-Term bypass when trading equities?

4. What was the climate at Long-Term during the Russian financial crisis?

5. After the Russian financial crisis, what caused further fluctuations in the market?

(see the answer keys)

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