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

Multiple Choice Questions

1. Where was David W. Mullins working when Meriwether hired him?
(a) The United Nations.
(b) Salomon Brothers.
(c) Federal Reserve.
(d) Yale School of Finance.

2. Why did Long-Term trade in Italy?
(a) Meriwether was Italian.
(b) It was a safe market.
(c) The opportunity for big returns.
(d) The tax write-off opportunity.

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

4. How long did Long-Term expect their investors to commit?
(a) 3 years.
(b) 6 months.
(c) 1 year.
(d) 3 months.

5. Who charged Long-Term much lower fees than other clients?
(a) NYSE.
(b) Brokerage firms.
(c) The Federal Reserve.
(d) The hospitality industry.

6. What was practically impossible to determine about Long-Term?
(a) Actual fund assets.
(b) Who was in charge.
(c) Where it was located.
(d) Why it was doing so well.

7. Where were Italian bonds sold by Long-Term?
(a) Cayman Islands.
(b) Directly to investors.
(c) Swaps.
(d) Under the table.

8. In 1996, who did Long-Term first approach to handle their credit?
(a) Washington Mutual.
(b) Citibank.
(c) Bank of America.
(d) Chase.

9. What did the traders accept about the financial models they used?
(a) They removed the element of surprise.
(b) They were imperfect.
(c) They were smarter than humans.
(d) They were expensive.

10. What did Meriwether warn his investors against in 1994?
(a) A repeat performance.
(b) His early retirement.
(c) Further growth.
(d) Not investing enough with Long-Term.

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

12. What type of government paper was bought in Italy?
(a) Italian money.
(b) Deeds to monuments.
(c) Fluctuating rate.
(d) Floating rate.

13. What financial crisis did Long-Term make it through that most of the market didn't?
(a) The Mexican crisis.
(b) The Germany crisis.
(c) The Switzerland crisis.
(d) The U.S. crisis.

14. What group did Meriwether found in 1977?
(a) The Arbitrage Group.
(b) The Commanders.
(c) The Meegen Group.
(d) Smith & Meriwether Co.

15. Meriwether was threatened with what, if his Treasury bill deal did not pan out?
(a) A lawsuit.
(b) A promotion.
(c) Termination.
(d) Death.

Short Answer Questions

1. What did the letter Meriwether sent to his clients claim it was difficult to do with Long-Term?

2. Where was the London office for Long-Term located?

3. In 1994, why did the yield raise on the thirty year Treasury bond?

4. Who helped Meriwether raise money for Long-Term?

5. Who developed the Black-Scholes model?

(see the answer keys)

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