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

Multiple Choice Questions

1. What were popular pools in 1993?
(a) Oil.
(b) Electricity.
(c) Mortgage.
(d) Green energy.

2. How much money did Meriwether need to start Long-Term?
(a) $1 billion.
(b) $50 million.
(c) $2.5 billion.
(d) $100,000.

3. In 1996, what was the response of most of the banks in terms of offering credit financing to Long-Term?
(a) Interested.
(b) Interested but wary.
(c) Eager.
(d) Competitive.

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

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

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

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

8. How much of the face value of a bond do buyers typically pay?
(a) 15%.
(b) 10%.
(c) 25%.
(d) 1%.

9. What affected bond trading in the 1970's?
(a) The democratic elections.
(b) The Vietnam War.
(c) The international monetary crisis.
(d) The price of commodities.

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

11. What were the models Long-Term used unable to predict?
(a) Investor's exact return.
(b) Long-Term's exact income.
(c) All of these.
(d) Market collapse.

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

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

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

15. What did the banks and investors use to estimate Long-Term's assets?
(a) History of investments.
(b) Their exposure.
(c) Net worth of investors.
(d) All of these.

Short Answer Questions

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

2. What did Rosenfeld and his friend develop?

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

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

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

(see the answer keys)

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