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. What was the leverage of Long-Term, following its meeting with the Fed?
(a) 25-1.
(b) 50-1.
(c) 100-1.
(d) 10-1.

2. What year was the Federal Reserve System created?
(a) 1995.
(b) 1913.
(c) 1901.
(d) 1950.

3. When the financial market in Russia collapsed, what were many in the market attempting to do?
(a) Release losing positions.
(b) Leave the country.
(c) Invest in Italy.
(d) Acquire losing positions.

4. What put pressure on the currency in Brazil?
(a) Warren Buffet paid off Brazilian debt.
(b) Moody's downgraded Brazilian debt.
(c) Goldman's bought out China's debt.
(d) The United State balanced the budget.

5. What word did people often use to describe Long-Term?
(a) Genius.
(b) Communist.
(c) Dangerous.
(d) Stupid.

Short Answer Questions

1. At what level was the swap rate of the United States in April 1998?

2. Why was Long-Term unable to get out of the situation with Russia?

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

4. When markets get jumpy, what begins to rise?

5. In 1998, what act led Long-Term to a fall?

Short Essay Questions

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

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

3. What did Standard & Poor downgrade that would affect Long-Term significantly?

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

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

6. What was the goal of the Federal Reserve when it was created?

7. What contributes to the estimation of market volatility?

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

9. Following the financial crisis in Russia, what did the partners do to begin raising money?

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

(see the answer keys)

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