When Genius Failed Test | Final 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 was the Fed Chairman in 1997?
(a) Warren Buffet.
(b) Alan Greenspan.
(c) Hillary Clinton.
(d) Madeleine Albright.

2. What did Long-Term think about the financial crisis that hit in August of 1998?
(a) It was serious but would recover.
(b) It was not serious.
(c) It was serious and would not recover.
(d) It was not serious but would not recover.

3. Where did the private contracts Long-Term made in 1998 trade?
(a) Overseas.
(b) Privately.
(c) On the exchange.
(d) In Russia.

4. The purpose of the Federal Reserve System was to promote what?
(a) Morality.
(b) Local investments.
(c) Stability.
(d) Honest investments.

5. When Russia first experienced turmoil, Long-Term was confident that what would happen?
(a) Investors would back out.
(b) Spreads would converge.
(c) Spreads would never meet.
(d) The country would recover.

Short Answer Questions

1. What award did Merton and Scholes win for economics?

2. What was the first horrible month Long-Term had?

3. In the mid-1990's, what was the ratio of leverage on Wall Street?

4. What resource close to Long-Term began to experience financial difficulties following the financial problems in Russia?

5. What are some of the new markets Long-Term looked into in 1997?

Short Essay Questions

1. In spite of the economic crisis in Russia, what did Meriwether believe about Long-Term's trades?

2. What did the Fed determine would happen if Long-Term failed?

3. In 1997, what was Meriwether encouraging his employees to do?

4. How much of Long-Term did the Union Bank of Switzerland buy on a hedge?

5. Why did banks and investment banks get involved in the derivatives market?

6. Who warned Long-Term about making trades that counted on falling stock prices?

7. Why did the issue in Russia cost Long-Term money on an initial basis?

8. In terms of the spreads in 1998, what was the difference between what Long-Term expected them to do and what they actually did?

9. What was the financial climate when Merton and Scholes were awarded the Nobel Prize?

10. By the end of August 1998, what did the movement in the bond market look like?

(see the answer keys)

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