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 Long-Term want to do for investors?
(a) Build trust.
(b) Make money.
(c) Limit risk.
(d) All of these.

2. What did Black and Scholes use to calculate market change?
(a) History.
(b) In depth financial patterns.
(c) Calculus and computer models.
(d) Meriwether's advice.

3. What was the typical scenario for bond investors in 1994?
(a) Loss.
(b) Few invested in bonds.
(c) Minimal gains.
(d) Substantial gains.

4. What unusual event happened when Meriwether began working with Treasury futures?
(a) He lost millions.
(b) The price rose.
(c) The U.S. government collapsed.
(d) The price fell.

5. What company was Kapor the founder of?
(a) Lochfield Growing Corporation.
(b) Finance Development International.
(c) Circuit Finance, Inc.
(d) Lotus Development Corporation.

Short Answer Questions

1. How many employees were with Long-Term in 1996?

2. What year did Meriwether hire Myron Scholes?

3. What was Meriwether's team allowed to do, following the Treasury bill deal?

4. In 1994, why did the yield raise on the thirty year Treasury bond?

5. Meriwether believed that risk and volatility were what?

Short Essay Questions

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

2. Why was Meriwether made a partner at Salomon?

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

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

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

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

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

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

9. Why did hedge funds make money for managers?

10. Why are hedge funds considered low risk?

(see the answer keys)

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