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 first horrible month Long-Term had?
(a) June, 1998.
(b) It never had a horrible month.
(c) July, 1998.
(d) August, 1998.

2. What notable player was on vacation during the crisis in Russia?
(a) The president of Russia.
(b) Warren Buffet.
(c) The president of the United States.
(d) Alan Greenspan.

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

4. When markets get jumpy, what begins to rise?
(a) Option prices.
(b) Real estate.
(c) All of these.
(d) The price of gold.

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

Short Answer Questions

1. What word did people often use to describe Long-Term?

2. In 1996, what was Meriwether encouraging Long-Term to do?

3. What did Long-Term avoid by working with derivatives instead of stocks?

4. Who threatened to stop clearing the trades at Long-Term if their fund fell below a particular amunt?

5. What was the leverage of Long-Term, following its meeting with the Fed?

Short Essay Questions

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

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

3. What was the risk to the market if Long-Term unraveled?

4. What move did Salomon make that surprised Long-Term?

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

6. Why were regulators concerned about the volume of banks and investment banks involved in the derivatives market?

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

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

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

10. Who was Jon Corzine?

(see the answer keys)

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