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) J.F. Salomon.
(b) Warren Buffet.
(c) John Meriwether.
(d) Paul Mozer.

2. What was Meriwether's team allowed to do, following the Treasury bill deal?
(a) Spread trades.
(b) Coach the office.
(c) Set Treasury standards.
(d) Vacation in Italy.

3. In order for Meriwether's Treasury futures investment to work, what did he need market prices to do?
(a) None of these.
(b) Remain the same.
(c) Converge.
(d) Fluctuate drastically.

4. What is the CFTC short for?
(a) Commodities Futures Trading Commission.
(b) Commodities Finding True Commission.
(c) Counting Futures Trading Commodities.
(d) Capitalism Fortune Trust Commonwealth.

5. What did the traders accept about the financial models they used?
(a) They were expensive.
(b) They were smarter than humans.
(c) They removed the element of surprise.
(d) They were imperfect.

Short Answer Questions

1. When Meriwether increased his position in Treasury futures, what did he expect the market to do?

2. What did Long-Term expect foreign banks to invest?

3. Michael Steindardt believed what was the "culprit in 1994"?

4. How much of the face value of a bond do buyers typically pay?

5. In 1996, the first bank Long-Term approached regarding credit deemed Long-Term as what?

Short Essay Questions

1. What are relative value trades?

2. What dictates whether or interest only securities rise or fall?

3. Why did the issue in Russia cost Long-Term money on an initial basis?

4. Why did hedge funds make money for managers?

5. What was the goal of the Federal Reserve when it was created?

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

7. Following the crisis in Russia, what position did investors take that adversely affected Long-Term?

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

9. In spite of the economic crisis in Russia, what did Meriwether believe about Long-Term's trades?

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

(see the answer keys)

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