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

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

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

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

5. In 1998, Long-Term expected prices to do what?
(a) Fall.
(b) Stay the same.
(c) Fluctuate.
(d) Rise.

Short Answer Questions

1. How many banks stepped forward to help bail out Long-Term?

2. When Russia first experienced turmoil, Long-Term was confident that what would happen?

3. How much equity did Long-Term have hold of in 1997?

4. At what level was the swap rate of the United States in April 1998?

5. After the financial crisis in Russia, what did Long-Term regret?

Short Essay Questions

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

2. In 1997, what was Meriwether encouraging his employees to do?

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

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

5. Why did the issue in Russia cost Long-Term money on an initial basis?

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

7. What was the Fed's response to Long-Term's exposure?

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

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

10. Who was Jon Corzine?

(see the answer keys)

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