When Genius Failed Test | Final 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 Long-Term's signature trade based on?

2. If the Long-Term fund failed, what would counter parties have to do?

3. When did Long-Term start losing money?

4. What was the limitation on borrowing for equity trading?

5. What did Long-Term think about the financial crisis that hit in August of 1998?

Short Essay Questions

1. Why did banks and investment banks get involved in the derivatives market?

2. In spite of the economic crisis in Russia, what did Meriwether believe about Long-Term's trades?

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

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

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

6. Why were regulators concerned about the volume of banks and investment banks involved in the derivatives market?

7. When did huge losses begin for Long-Term and why?

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

9. Why did the issue in Russia cost Long-Term money on an initial basis?

10. What was the risk to the market if Long-Term unraveled?

Essay Topics

Write an essay for ONE of the following topics:

Essay Topic 1

When Meriwether set up Long-Term, he had to take many steps to create the company. Write an essay examining the process Meriwether went through to create Long-Term.

Essay Topic 2

Basing your answer on the height of Long-Term's career, compare and contrast several of the companies on Wall Street with Long-Term, citing examples from the text.

Essay Topic 3

There were many warning signs that the profits delivered by Long-Term couldn't last. Yet, many companies did everything possible to keep some investments going at higher and higher levels when they should have slowed. Using greed as a theme, analyze this situation.

(see the answer keys)

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