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. Who became the temporary CEO of Meriwether's group when scandal hit?
(a) Paul Mozer.
(b) John Meriwether.
(c) J.F. Salomon.
(d) Warren Buffet.

2. How much did Long-Term earn in its first year of operation?
(a) 10%.
(b) 75%.
(c) 28%.
(d) 5%.

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

4. What type of strategy did Long-Term employ?
(a) High risk.
(b) Moderate risk.
(c) Whatever was dictated by the market.
(d) Low risk.

5. During the time period in "Hedge Fund", how many people were millionaires due to the stock market?
(a) 20 million.
(b) 1 million.
(c) 6 million.
(d) 5 million.

Short Answer Questions

1. What level of risk did Long-Term offer?

2. What notable invention changed the face of trading in the 1970's?

3. Once in business, what did Long-Term have an easy time getting from banks?

4. In bond trading, what are loans backed by collateral called?

5. What did Black and Scholes think price changes were?

Short Essay Questions

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

2. What are relative value trades?

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

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

5. On what did Long-Term base the claim that it was difficult to lose money with them?

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

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

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

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

10. What were the legal limits on hedge fund investors?

(see the answer keys)

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