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

Multiple Choice Questions

1. In 1996, what was Long-Term seeking from the bank that would handle their credit?
(a) Asset storage.
(b) Legitimacy.
(c) Cash flow.
(d) Tax shelter.

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

3. Who helped Meriwether raise money for Long-Term?
(a) Merrill Lynch.
(b) Warren Buffet.
(c) No one.
(d) Salomon Brothers.

4. What did Black and Scholes think price changes were?
(a) Dangerous.
(b) Common occurences.
(c) Random events.
(d) Smart corrections.

5. What year did Meriwether hire Myron Scholes?
(a) 1994.
(b) 1996.
(c) 1993.
(d) 1995.

6. Where was the London office for Long-Term located?
(a) Mayfair.
(b) Buckingham Palace.
(c) Winchester.
(d) Picadilly Square.

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

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

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

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

11. Michael Steindardt believed what was the "culprit in 1994"?
(a) Wealth.
(b) Leverage.
(c) Foolish investments.
(d) Poverty.

12. What was the end result of Meriwether's Treasury bill deal?
(a) It frightened his colleagues.
(b) It made a lot of money.
(c) It was not a notable deal.
(d) It lost a lot of money.

13. How much did Long-Term earn in its first year of operation?
(a) 75%.
(b) 5%.
(c) 28%.
(d) 10%.

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

15. In bond trading, what are loans backed by collateral called?
(a) Exclusive trades.
(b) Fair financing.
(c) Repo financing.
(d) Mini trades.

Short Answer Questions

1. Who did most funds have to be registered with?

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

3. How much did the accounts for investors increase in 1994?

4. What did banks and investors want from Long-Term?

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

(see the answer keys)

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