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) Smart corrections.
(b) Common occurences.
(c) Dangerous.
(d) Random events.

2. What was the end result of Meriwether's Treasury bill deal?
(a) It made a lot of money.
(b) It lost a lot of money.
(c) It frightened his colleagues.
(d) It was not a notable deal.

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

4. What notable company went bankrupt in the 1970's?
(a) Penn North Distillery.
(b) Penn Coal.
(c) Penn Central Railroad.
(d) Penn Weapons Industry.

5. What did Long-Term expect foreign banks to invest?
(a) Only individuals could invest.
(b) $100 million.
(c) $10 million.
(d) $1 million.

Short Answer Questions

1. By the end of 1996, what was the status of the credit financing Long-Term wanted?

2. What did the banks and investors use to estimate Long-Term's assets?

3. How long did Long-Term expect their investors to commit?

4. In 1996, how much did Long-Term have in assets?

5. In 1993, what was happening more than usual in America?

Short Essay Questions

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

2. How would a loan from a major bank help the partners at Long-Term make money?

3. Why are hedge funds considered low risk?

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

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

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

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

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

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

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

(see the answer keys)

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