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 expect foreign banks to invest?
(a) $1 million.
(b) Only individuals could invest.
(c) $10 million.
(d) $100 million.

2. Where was the London office for Long-Term located?
(a) Picadilly Square.
(b) Mayfair.
(c) Buckingham Palace.
(d) Winchester.

3. In 1994, why did the yield raise on the thirty year Treasury bond?
(a) It rose 5%.
(b) It dropped 10%.
(c) It dropped 16%.
(d) It rose 16%.

4. How much money did Meriwether need to start Long-Term?
(a) $2.5 billion.
(b) $1 billion.
(c) $100,000.
(d) $50 million.

5. What notable invention changed the face of trading in the 1970's?
(a) The cell phone.
(b) The scientific calculator.
(c) The computer.
(d) The video camera.

Short Answer Questions

1. What financial crisis did Long-Term make it through that most of the market didn't?

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

3. What is the method of paying a percentage of a bond called?

4. What did Long-Term want to do for investors?

5. What hedge fund caused a pound devaluation in Europe but made over a billion dollars?

Short Essay Questions

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

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

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

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

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

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

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

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

9. What was Meriwether's business model for Long-Term?

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

(see the answer keys)

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