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

Multiple Choice Questions

1. 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%.

2. In 1994, why did the price of bonds drop?
(a) Property value went down.
(b) The Fed lowered interest rates.
(c) The Fed raised interest rates.
(d) There was too much wealth in America.

3. Who typically invested in hedge funds?
(a) The general population.
(b) Foreign banks.
(c) The Federal Reserve.
(d) A club of exclusive investors.

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

5. How much money did Rosenfeld's business bring in?
(a) Five million.
(b) Two million.
(c) Hundreds of thousands.
(d) A couple thousand.

6. What models did Long-Term follow?
(a) Black-Scholes.
(b) Merton.
(c) All of these.
(d) Value-at-Risk.

7. How many employees were with Long-Term in 1996?
(a) Less than a dozen.
(b) A couple dozen.
(c) Five.
(d) Five hundred.

8. What percentage of Americans had no knowledge of Long-Term?
(a) 75%.
(b) 50%.
(c) 99%.
(d) 10%.

9. By the end of 1996, what was the status of the credit financing Long-Term wanted?
(a) They had financing.
(b) No one would finance them.
(c) They still did not have it.
(d) All of these.

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

11. Who ran the London office for Long-Term?
(a) Buffet.
(b) Meriwether.
(c) Mullins.
(d) Haghani.

12. What level of risk did Long-Term offer?
(a) None.
(b) High.
(c) Low.
(d) Medium.

13. Who gains from working with hedge funds?
(a) Managers.
(b) Women.
(c) Impoverished countries.
(d) The government.

14. What is the method of paying a percentage of a bond called?
(a) A haircut.
(b) A bond fee.
(c) A trim.
(d) A percentage price.

15. What did Black and Scholes use to calculate market change?
(a) History.
(b) Calculus and computer models.
(c) Meriwether's advice.
(d) In depth financial patterns.

Short Answer Questions

1. What company was Kapor the founder of?

2. What did Long-Term do when IOs started to fall?

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

4. What did a dealer from J.F. Eckstein & Co. want from Meriwether in 1979?

5. In the 1970's, what type of trading was considered dull?

(see the answer keys)

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