|Name: _________________________||Period: ___________________|
This test consists of 5 short answer questions, 10 short essay questions, and 1 (of 3) essay topics.
Short Answer Questions
1. Who suspended arbitrage operations in April 1998?
2. When Russia first experienced turmoil, Long-Term was confident that what would happen?
3. In 1998, Long-Term expected prices to do what?
4. In the mid-1990's, what was the ratio of leverage on Wall Street?
5. What was the first horrible month Long-Term had?
Short Essay Questions
1. What move did Salomon make that surprised Long-Term?
2. Following the crisis in Russia, what position did investors take that adversely affected Long-Term?
3. In terms of the spreads in 1998, what was the difference between what Long-Term expected them to do and what they actually did?
4. What was the Fed's response to Long-Term's exposure?
5. What strategy led to Long-Term's downfall during the Russian financial crisis?
6. Since Long-Term expected stock prices would fall, what did they sell insurance against?
7. How much of Long-Term did the Union Bank of Switzerland buy on a hedge?
8. By the end of August 1998, what did the movement in the bond market look like?
9. When did huge losses begin for Long-Term and why?
10. In spite of the economic crisis in Russia, what did Meriwether believe about Long-Term's trades?
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
Write a brief essay supporting or refuting the following statement, citing examples from the text: Long-Term set out to be a low risk company and exemplified that mission for several years.
This section contains 496 words
(approx. 2 pages at 300 words per page)