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 was the common belief regarding nuclear powers?
(a) They always default.
(b) They do not have capital.
(c) They are not stable.
(d) They never default.

2. What factor was forcing those with hedge funds to sell?
(a) Toxic assets.
(b) The Fed's involvement.
(c) Lack of credit.
(d) Ample credit.

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

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

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

6. What award did Merton and Scholes win for economics?
(a) The Wall Street Trust.
(b) The Nobel Prize.
(c) The Academy Award.
(d) None of these.

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

8. How did regulators respond to the involvement of banks in the derivatives market?
(a) They were worried.
(b) They were delighted.
(c) There were not concerned.
(d) They encouraged it.

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

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

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

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

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

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

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

Short Answer Questions

1. What did Scholes and Merton think of some of the private trades Long-Term made in 1998?

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

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

4. What notable player was on vacation during the crisis in Russia?

5. In 1998, Long-Term expected prices to do what?

(see the answer keys)

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