When Genius Failed Test | Mid-Book Test - Hard

Roger Lowenstein
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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 was the typical scenario for bond investors in 1994?

2. In 1996, who did Long-Term first approach to handle their credit?

3. What did the Black-Scholes model believe was constant?

4. What level of risk did Long-Term offer?

5. What were the models Long-Term used unable to predict?

Short Essay Questions

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

2. Why are hedge funds considered low risk?

3. What are relative value trades?

4. When did Meriwether begin making sales calls for Long-Term?

5. What was Long-Term's objective in seeking out a bank to finance their credit?

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

7. Why did Black and Scholes believe that price changes were random?

8. When investing in Italy, what did Long-Term avoid telling their customers?

9. What was Meriwether's business model for Long-Term?

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

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

Write a brief essay supporting or refuting the following statement, citing examples from the text: Meriwether fully expected to continue making substantial returns with Long-Term's investment model.

Essay Topic 3

The investment requirements of Long-Term were quite stringent. Citing examples from the text, write an essay examining the investment requirements and opportunity for return for potential Long-Term investors.

(see the answer keys)

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