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 typically happens to stock prices when a merger is revealed?
(a) They stay the same.
(b) They go down.
(c) They go up.
(d) They crash.

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

3. What did Long-Term risk losing if they allowed their assets to fall below five hundred million dollars?
(a) Their relationships with bankers.
(b) The right to trade.
(c) Their workers.
(d) Their office.

4. To create a paired-share, what is common stock partnered with?
(a) Shorted stocks.
(b) Private stock.
(c) Bond deals.
(d) Preferred stock.

5. Once the financial market in Russia collapsed, what did people stop trading?
(a) Stocks.
(b) Bonds.
(c) Corn.
(d) Commodities.

Short Answer Questions

1. In 1998, what act led Long-Term to a fall?

2. When markets get jumpy, what begins to rise?

3. Who was the Fed Chairman in 1997?

4. In 1998, who published Meriwether's letter to his clients?

5. When Long-Term met with the Fed, it was obvious they did not have enough money to make it through what?

Short Essay Questions

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

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

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

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

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

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

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

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

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

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

(see the answer keys)

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