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. Where were Italian bonds sold by Long-Term?
(a) Cayman Islands.
(b) Swaps.
(c) Directly to investors.
(d) Under the table.

2. In 1996, Long-Term was two and a half times larger than what company?
(a) Bank of America.
(b) Chase.
(c) Fidelity Magellan.
(d) Lehman Brothers.

3. In 1996, Long-Term was four times as large as what?
(a) The largest hedge fund.
(b) A small European country.
(c) The Mexican Treasury.
(d) The U.S. Treasury.

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

5. Where did Meriwether work in 1979?
(a) Salomon Brothers.
(b) Long-Term.
(c) Lehman.
(d) Merrill Lynch.

Short Answer Questions

1. In 1994, why did the price of bonds drop?

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

3. What percentage of Americans had no knowledge of Long-Term?

4. Where was Robert C. Merton working when Meriwether hired him?

5. In the 1970's, what type of trading was considered dull?

Short Essay Questions

1. In 1996, which significant companies did Long-Term surpass in terms of assets?

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

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

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

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

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

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

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

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

10. By the time Long-Term had been in business for two years, how did it compare to other old Wall Street companies?

(see the answer keys)

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