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 avoid by working with derivatives instead of stocks?
(a) Disclosure.
(b) Profit.
(c) Fees.
(d) Outside interest.

2. In the mid-1990's, what was the ratio of leverage on Wall Street?
(a) 25-1.
(b) 45-1.
(c) 10-1.
(d) 100-1.

3. Where did the private contracts Long-Term made in 1998 trade?
(a) Overseas.
(b) On the exchange.
(c) In Russia.
(d) Privately.

4. Who did Long-Term threaten to sue, following a threat not to clear trades?
(a) ING trading.
(b) Waterhouse Cooper.
(c) Chase.
(d) Bear Sterns.

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

Short Answer Questions

1. What was the dollar amount of the premium Long-Term paid for its loan?

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

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

4. What was the common belief regarding nuclear powers?

5. In 1998, what type of contracts did Long-Term make with private entities?

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

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

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

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

7. When did huge losses begin for Long-Term and why?

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

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

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

(see the answer keys)

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