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 typically invested in hedge funds?
(a) The Federal Reserve.
(b) A club of exclusive investors.
(c) Foreign banks.
(d) The general population.

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

3. Once in business, what did Long-Term have an easy time getting from banks?
(a) Money.
(b) Workers.
(c) Endorsements.
(d) Personal information.

4. Where was Robert C. Merton working when Meriwether hired him?
(a) The Federal Exchange Commission.
(b) Harvard.
(c) NASA.
(d) Wall Street.

5. In 1994, why did the price of bonds drop?
(a) The Fed lowered interest rates.
(b) The Fed raised interest rates.
(c) Property value went down.
(d) There was too much wealth in America.

Short Answer Questions

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

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

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

4. Why did Long-Term trade in Italy?

5. Who charged Long-Term much lower fees than other clients?

Short Essay Questions

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

2. Why did bonds lose their value in the 1970's?

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

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

5. What surprise happened when Meriwether was trading Treasury Bill futures?

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

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

8. What are relative value trades?

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

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

(see the answer keys)

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