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 happened to Meriwether's Treasury bill deal before it was resolved?
(a) It fell apart.
(b) It remained steady.
(c) Big losses.
(d) Huge gains.

2. What models did Long-Term follow?
(a) Value-at-Risk.
(b) All of these.
(c) Black-Scholes.
(d) Merton.

3. In bond trading, what are loans backed by collateral called?
(a) Mini trades.
(b) Repo financing.
(c) Fair financing.
(d) Exclusive trades.

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

5. In 1996, Long-Term had achieved thirty times its what?
(a) Starting capital.
(b) Proposed value.
(c) Debt capacity.
(d) Original goal.

Short Answer Questions

1. What did the Black-Scholes model believe was constant?

2. What was practically impossible to determine about Long-Term?

3. What company was Kapor the founder of?

4. Where was the London office for Long-Term located?

5. What year did Meriwether hire Myron Scholes?

Short Essay Questions

1. Why did Black and Scholes believe that price changes were random?

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

3. Why are hedge funds considered low risk?

4. When Meriwether was building his team at the Arbitrage Group, what qualities did he look for?

5. What was Meriwether's group at Salomon given the authority to do?

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

7. Why was it difficult to know the exact amount of assets Long-Term held?

8. What are relative value trades?

9. Why was the investment in Italy a risky one for Long-Term to make?

10. When did Meriwether begin making sales calls for Long-Term?

(see the answer keys)

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