When Genius Failed Test | Final Test - Medium

Roger Lowenstein
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This test consists of 5 multiple choice questions and 5 short answer questions.

Multiple Choice Questions

1. What was the leverage of Long-Term, following its meeting with the Fed?
(a) 100-1.
(b) 50-1.
(c) 25-1.
(d) 10-1.

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

3. What did Long-Term avoid by working with derivatives instead of stocks?
(a) Profit.
(b) Outside interest.
(c) Disclosure.
(d) Fees.

4. What did the incident on August 21 cost Long-Term?
(a) $1 billion.
(b) $200 million.
(c) $150 million.
(d) $2 billion.

5. In 1998, what were many hedge funds selling insurance against?
(a) Rising prices.
(b) The Latin market.
(c) The U.S. Treasury.
(d) Falling prices.

Short Answer Questions

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

2. On what date did Russia declare a debt moratorium?

3. How did regulators respond to the involvement of banks in the derivatives market?

4. In 1996, why was it difficult to continue to find strong profits in arbitrage trades?

5. If the Long-Term fund failed, what would counter parties have to do?

(see the answer keys)

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