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

2. What was the internal climate at Long-Term in 1998?
(a) The same as always.
(b) Positive.
(c) Deteriorating.
(d) Negative.

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

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

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

6. In August 1998, how far down was Long-Term for the year-to-date?
(a) 2%.
(b) 52%.
(c) 10%.
(d) 35%.

7. After the Russian financial crisis, what caused further fluctuations in the market?
(a) Panicked investors.
(b) Interest from big oil.
(c) Interest from the IRS.
(d) Small time investors.

8. In 1997, who awarded Long-Term the loan warrant it had requested?
(a) Union Bank of Switzerland.
(b) Chase.
(c) The Cayman Islands Commons.
(d) Bank of America.

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

10. What did Long-Term risk losing if they allowed their assets to fall below five hundred million dollars?
(a) Their relationships with bankers.
(b) Their office.
(c) The right to trade.
(d) Their workers.

11. After the meeting with the Fed, a market movement of what percentage could have ended Long-Term?
(a) 25%.
(b) 30%.
(c) 1%.
(d) 10%.

12. When Russia began to default on its loans, what did people start doing with their high risk bonds?
(a) Trading.
(b) Selling.
(c) Buying.
(d) Holding.

13. When the Fed visited Long-Term, what did Hilibrand show them?
(a) The risk aggregator.
(b) The door.
(c) His recent financial model.
(d) The new buildings.

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

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

Short Answer Questions

1. How much equity did Long-Term have hold of in 1997?

2. Once the financial market in Russia collapsed, what did people stop trading?

3. What was the dollar amount of the premium Long-Term paid for its loan?

4. In 1998, what were many hedge funds selling insurance against?

5. Who was the Fed Chairman in 1997?

(see the answer keys)

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