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This test consists of 15 multiple choice questions and 5 short answer questions.

Multiple Choice Questions

1. What happened to Meriwether's Treasury bill deal before it was resolved?
(a) Huge gains.
(b) It remained steady.
(c) It fell apart.
(d) Big losses.

2. During the time period in "Hedge Fund", how many people were millionaires due to the stock market?
(a) 20 million.
(b) 1 million.
(c) 6 million.
(d) 5 million.

3. What was J.F. Eckstein & Co. primarily working on in 1979?
(a) Stocks.
(b) Treasury Bill futures.
(c) IO's.
(d) Bonds.

4. Meriwether believed that risk and volatility were what?
(a) A part of life.
(b) Unmanagable.
(c) Quantifiable.
(d) Abstract ideas.

5. Where was Robert C. Merton working when Meriwether hired him?
(a) Wall Street.
(b) NASA.
(c) Harvard.
(d) The Federal Exchange Commission.

6. What did Long-Term do with off-the-run bonds?
(a) Hold them for profit.
(b) Loan them to other firms.
(c) Unload them quickly.
(d) Avoid them.

7. In 1994, why did the yield raise on the thirty year Treasury bond?
(a) It dropped 10%.
(b) It rose 5%.
(c) It dropped 16%.
(d) It rose 16%.

8. What did a dealer from J.F. Eckstein & Co. want from Meriwether in 1979?
(a) Help.
(b) Empathy.
(c) Real estate tips.
(d) A better financial model.

9. How much money did Long-Term earn in 1996?
(a) $500 million.
(b) $100 million.
(c) $2.1 billion.
(d) $1 billion.

10. What did Meriwether do with his staff?
(a) All of these.
(b) Travel.
(c) Play golf.
(d) Dine.

11. What type of strategy did Long-Term employ?
(a) Whatever was dictated by the market.
(b) High risk.
(c) Low risk.
(d) Moderate risk.

12. What notable company went bankrupt in the 1970's?
(a) Penn North Distillery.
(b) Penn Weapons Industry.
(c) Penn Coal.
(d) Penn Central Railroad.

13. How much did the accounts for investors increase in 1994?
(a) 50%.
(b) 5%.
(c) 10%.
(d) 20%.

14. Why did Rosenfeld choose not to co-found Kapor's project?
(a) He was too interested in travel.
(b) He was too interested in finance.
(c) He did not like Kapor.
(d) He was competitive with Kapor.

15. In the 1970's, what type of trading was considered dull?
(a) Securities.
(b) Gasoline.
(c) Bond.
(d) Corn.

Short Answer Questions

1. What did the traders accept about the financial models they used?

2. What year did Meriwether hire Myron Scholes?

3. In order for Meriwether's Treasury futures investment to work, what did he need market prices to do?

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

5. What was the end result of Meriwether's Treasury bill deal?

(see the answer keys)

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