When Genius Failed Test | Mid-Book Test - Medium

Roger Lowenstein
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This test consists of 5 multiple choice questions, 5 short answer questions, and 10 short essay questions.

Multiple Choice Questions

1. What did Long-Term do when IOs started to fall?
(a) Sell their shares.
(b) Buy them up.
(c) Explain the situation to investors.
(d) Lie to investors.

2. Where was Robert C. Merton working when Meriwether hired him?
(a) The Federal Exchange Commission.
(b) NASA.
(c) Wall Street.
(d) Harvard.

3. What is the method of paying a percentage of a bond called?
(a) A trim.
(b) A percentage price.
(c) A haircut.
(d) A bond fee.

4. In 1993, what was happening more than usual in America?
(a) Day trading.
(b) Starvation.
(c) Refinancing.
(d) Bankruptcy.

5. What did a dealer from J.F. Eckstein & Co. want from Meriwether in 1979?
(a) Empathy.
(b) A better financial model.
(c) Real estate tips.
(d) Help.

Short Answer Questions

1. What year did Meriwether hire Myron Scholes?

2. What financial crisis did Long-Term make it through that most of the market didn't?

3. What did Meriwether do with his staff?

4. What hedge fund caused a pound devaluation in Europe but made over a billion dollars?

5. Who became the temporary CEO of Meriwether's group when scandal hit?

Short Essay Questions

1. Why were convergence trades the safest trades made by Long-Term?

2. Although Long-Term was performing so well by 1996, how many Americans knew of the fund's existence?

3. What methods did Black and Scholes use to predict the changes that would take place in the market?

4. Why are hedge funds considered low risk?

5. What are relative value trades?

6. Why did Meriwether increase his position on Treasury Bill futures in spite of the market fluctuation?

7. What was Meriwether's business model for Long-Term?

8. When additional investors returned to the Italian market, what did Long-Term do?

9. When investing in Italy, what did Long-Term avoid telling their customers?

10. What did Long-Term do to limit risk in bond trading?

(see the answer keys)

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