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

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

3. When Russia first experienced turmoil, Long-Term was confident that what would happen?
(a) The country would recover.
(b) Spreads would converge.
(c) Investors would back out.
(d) Spreads would never meet.

4. In 1998, what type of contracts did Long-Term make with private entities?
(a) Long-term.
(b) Liquid.
(c) Short-term.
(d) Illegal.

5. 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.

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

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

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 were excited.
(c) They were impressed.
(d) They supported them.

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

10. What was Long-Term's signature trade based on?
(a) Consistency of volatility.
(b) Consistency of investments.
(c) None of these.
(d) Consistency of failure.

11. In 1998, what were many hedge funds selling insurance against?
(a) Rising prices.
(b) Falling prices.
(c) The U.S. Treasury.
(d) The Latin market.

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

13. During the financial crisis in 1998, what did the partners keep from the workers?
(a) Profits.
(b) Hope.
(c) Information.
(d) Money.

14. After the financial crisis in Russia, what did Long-Term regret?
(a) All of these.
(b) Forcing investors to take back money.
(c) Creating private deals.
(d) Creating deals that were not liquid.

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

Short Answer Questions

1. What companies were selling bonds for Russia?

2. When the Fed visited Long-Term, what did Hilibrand show them?

3. How many banks stepped forward to help bail out Long-Term?

4. What word did people often use to describe Long-Term?

5. When did Long-Term begin scrambling to raise money?

(see the answer keys)

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