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This test consists of 5 short answer questions, 10 short essay questions, and 1 (of 3) essay topics.

Short Answer Questions

1. In 1996, Long-Term was four times as large as what?

2. Who typically invested in hedge funds?

3. What were popular pools in 1993?

4. Meriwether believed that risk and volatility were what?

5. Where was the London office for Long-Term located?

Short Essay Questions

1. Why were convergence trades the safest trades made by Long-Term?

2. Why was Meriwether made a partner at Salomon?

3. Why was the investment in Italy a risky one for Long-Term to make?

4. What dictates whether or interest only securities rise or fall?

5. Why did Meriwether begin recruiting employees he had worked with at the Arbitrage Group?

6. Why did bonds lose their value in the 1970's?

7. When additional investors returned to the Italian market, what did Long-Term do?

8. What methods did Black and Scholes use to predict the changes that would take place in the market?

9. How would a loan from a major bank help the partners at Long-Term make money?

10. What was Meriwether's group at Salomon given the authority to do?

Essay Topics

Write an essay for ONE of the following topics:

Essay Topic 1

In the late 1970's, the financial climate was changing due to technology. Examine the changes this brought about in the financial market and how these changes directly affected Meriwether.

Essay Topic 2

Write a brief essay supporting or refuting the following statement, citing examples from the text: The irresponsible management of Long-Term by the partners led to its downfall.

Essay Topic 3

The academic model Long-Term used for investing proved impressive on many occasions.

1) What were the principles behind the Value-at-Risk models?

2) What were the problems with these models?

3) How did these models impact the investments placed by Long-Term?

(see the answer keys)

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