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. When did Long-Term start losing money?
(a) When Meriwether opened a new company.
(b) When Warren Buffet spoke out against Long-Term.
(c) When arbitrage operations were suspended.
(d) When the Asian market collapsed.

2. In 1998, what act led Long-Term to a fall?
(a) Shorting the U.S. market.
(b) Investing in the Asian market.
(c) Putting money into Italy.
(d) Shorting the Russian market.

3. How much equity did Long-Term have hold of in 1997?
(a) $5 billion.
(b) $1 billion.
(c) $0.
(d) $100 million.

4. How much money did Chase loan Long-Term so that they could continue to clear trades?
(a) $10 million.
(b) $5 million.
(c) $475 million.
(d) $752 million.

5. What resource close to Long-Term began to experience financial difficulties following the financial problems in Russia?
(a) Long-Term's management company.
(b) Italy.
(c) Latin America.
(d) Long-Term's audit company.

Short Answer Questions

1. When did the Russian market begin to fail?

2. In August 1998, how far down was Long-Term for the year-to-date?

3. What was the common belief regarding nuclear powers?

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

5. Who did Long-Term threaten to sue, following a threat not to clear trades?

Short Essay Questions

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

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

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

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

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

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

7. What contributes to the estimation of market volatility?

8. Since Long-Term expected stock prices would fall, what did they sell insurance against?

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

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

(see the answer keys)

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