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 Black and Scholes think price changes were?
(a) Random events.
(b) Dangerous.
(c) Common occurences.
(d) Smart corrections.

2. Where was David W. Mullins working when Meriwether hired him?
(a) The United Nations.
(b) Salomon Brothers.
(c) Yale School of Finance.
(d) Federal Reserve.

3. In the 1970's, what type of trading was considered dull?
(a) Gasoline.
(b) Securities.
(c) Bond.
(d) Corn.

4. Who typically invested in hedge funds?
(a) A club of exclusive investors.
(b) Foreign banks.
(c) The general population.
(d) The Federal Reserve.

5. In 1996, what was Long-Term seeking from the bank that would handle their credit?
(a) Legitimacy.
(b) Cash flow.
(c) Asset storage.
(d) Tax shelter.

Short Answer Questions

1. Why did Rosenfeld choose not to co-found Kapor's project?

2. What did banks and investors want from Long-Term?

3. What unusual event happened when Meriwether began working with Treasury futures?

4. In 1996, what was the second bank Long-Term approached about financing their credit?

5. How much did Long-Term earn in its first year of operation?

Short Essay Questions

1. Why are hedge funds considered low risk?

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

3. What are relative value trades?

4. How did Long-Term respond to firms that would not waive the fee for the haircut?

5. Why did Meriwether begin recruiting employees he had worked with at the Arbitrage Group?

6. Why did bonds lose their value in the 1970's?

7. Why did hedge funds make money for managers?

8. What surprise happened when Meriwether was trading Treasury Bill futures?

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

10. What did the Black-Scholes model help Long-Term to predict?

(see the answer keys)

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