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

2. What was the internal climate at Long-Term in 1998?
(a) Deteriorating.
(b) Negative.
(c) The same as always.
(d) Positive.

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

4. What trading date dropped Long-Term below $1 billion in equity?
(a) September 21.
(b) April 15.
(c) October 10.
(d) September 5.

5. In August 1998, how far down was Long-Term for the year-to-date?
(a) 10%.
(b) 52%.
(c) 35%.
(d) 2%.

Short Answer Questions

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

2. When Russia began to default on its loans, what did people start doing with their high risk bonds?

3. During the turmoil of 1998, investors avoided Long-Term because they were trying to avoid what?

4. How much money did Chase loan Long-Term so that they could continue to clear trades?

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

Short Essay Questions

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

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

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

4. Following the financial crisis in Russia, what did the partners do to begin raising money?

5. In terms of the spreads in 1998, what was the difference between what Long-Term expected them to do and what they actually did?

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

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

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

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

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

(see the answer keys)

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