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

2. In 1997, who awarded Long-Term the loan warrant it had requested?
(a) Union Bank of Switzerland.
(b) Chase.
(c) Bank of America.
(d) The Cayman Islands Commons.

3. What was the internal climate at Long-Term in 1998?
(a) Deteriorating.
(b) Negative.
(c) Positive.
(d) The same as always.

4. How many banks stepped forward to help bail out Long-Term?
(a) 16.
(b) 20.
(c) 2.
(d) 30.

5. Who suspended arbitrage operations in April 1998?
(a) Salomon.
(b) Fidelity Bank and Trust.
(c) Goldman Sachs.
(d) Chase.

Short Answer Questions

1. When the financial market in Russia collapsed, what were many in the market attempting to do?

2. What was the result for some banks due to their involvement in the derivatives market?

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

4. In its first bad year, what did Long-Term maintain?

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

Short Essay Questions

1. During the financial crisis in 1998, where were the partners finding money?

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

3. What was the Fed's response to Long-Term's exposure?

4. When Meriwether reached out to his clients following the Russian crisis, how did he explain the effect of the situation in Russia?

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

6. Who was Jon Corzine?

7. What did Long-Term do when they expected stock prices to fall?

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

9. What strategy led to Long-Term's downfall during the Russian financial crisis?

10. Following the crisis in Russia, what position did investors take that adversely affected Long-Term?

(see the answer keys)

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