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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. What affected bond trading in the 1970's?

2. Meriwether was threatened with what, if his Treasury bill deal did not pan out?

3. In 1996, the first bank Long-Term approached regarding credit deemed Long-Term as what?

4. How much money did Long-Term earn in 1996?

5. How much did banks and investors make in conjunction with Long-Term?

Short Essay Questions

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

2. How did Long-Term respond to firms that would not waive the fee for the haircut?

3. Why did hedge funds make money for managers?

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

5. On what did Long-Term base the claim that it was difficult to lose money with them?

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

7. Why are hedge funds considered low risk?

8. What were the legal limits on hedge fund investors?

9. By the time Long-Term had been in business for two years, how did it compare to other old Wall Street companies?

10. Why was Meriwether made a partner at Salomon?

Essay Topics

Write an essay for ONE of the following topics:

Essay Topic 1

When Long-Term was faced with financial turmoil, it took only five weeks for it to lose staggering amounts of money. Examine the following points:

1) What was the financial profile of Long-Term prior to Russia's debt default?

2) What did the financial profile change so drastically?

3) What moves did Long-Term make to correct the situation and why were they ineffective?

Essay Topic 2

When Long-Term achieved major profits in its first year, Meriwether wrote a letter to investors warning against such a strong future performance.

1) Why did Meriwether feel it was important to communicate with his investors?

2) What warnings did Meriwether share with his investors?

3) Why did Meriwether feel it necessary to communicate at this level?

Essay Topic 3

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.

(see the answer keys)

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