When Genius Failed Test | Final Test - Medium

Roger Lowenstein
This set of Lesson Plans consists of approximately 99 pages of tests, essay questions, lessons, and other teaching materials.
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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 Russia began to default on its loans, what did people start doing with their high risk bonds?
(a) Holding.
(b) Selling.
(c) Buying.
(d) Trading.

2. What was Long-Term's signature trade based on?
(a) None of these.
(b) Consistency of volatility.
(c) Consistency of failure.
(d) Consistency of investments.

3. What was the result for some banks due to their involvement in the derivatives market?
(a) They made billions.
(b) They were nationally recognized.
(c) They went bankrupt.
(d) They were prosecuted.

4. How did regulators respond to the involvement of banks in the derivatives market?
(a) There were not concerned.
(b) They were delighted.
(c) They encouraged it.
(d) They were worried.

5. During the financial crisis in 1998, what did the partners keep from the workers?
(a) Money.
(b) Profits.
(c) Hope.
(d) Information.

Short Answer Questions

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

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

3. What regulation did Long-Term bypass when trading equities?

4. In August 1998, how far down was Long-Term for the month?

5. What typically happens to stock prices when a merger is revealed?

Short Essay Questions

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

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

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

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

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

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

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

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

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

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

(see the answer keys)

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