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

2. Who did most funds have to be registered with?
(a) Most funds did not have to be registered.
(b) CFTC.
(c) SEC.
(d) The Fed.

3. What did Long-Term expect foreign banks to invest?
(a) $1 million.
(b) $10 million.
(c) Only individuals could invest.
(d) $100 million.

4. What group did Meriwether found in 1977?
(a) The Meegen Group.
(b) The Arbitrage Group.
(c) Smith & Meriwether Co.
(d) The Commanders.

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

Short Answer Questions

1. In 1996, Long-Term was four times as large as what?

2. In 1994, what market did Long-Term begin to express an interest in?

3. How long did Long-Term expect their investors to commit?

4. Why did Long-Term trade in Italy?

5. What type of funds gained popularity in the 1990's?

Short Essay Questions

1. Why was Meriwether made a partner at Salomon?

2. What are relative value trades?

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

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

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

6. When investing in Italy, what did Long-Term avoid telling their customers?

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

8. What did Long-Term do to limit risk in bond trading?

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

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

(see the answer keys)

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