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

Multiple Choice Questions

1. What did the Black-Scholes model believe was constant?
(a) Meriwether's enthusiasm.
(b) Growth.
(c) Income.
(d) Volatility.

2. In 1993, what was happening more than usual in America?
(a) Bankruptcy.
(b) Day trading.
(c) Refinancing.
(d) Starvation.

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

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

5. Who became the temporary CEO of Meriwether's group when scandal hit?
(a) Paul Mozer.
(b) J.F. Salomon.
(c) John Meriwether.
(d) Warren Buffet.

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

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

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

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

10. What unusual event happened when Meriwether began working with Treasury futures?
(a) He lost millions.
(b) The U.S. government collapsed.
(c) The price rose.
(d) The price fell.

11. How much did banks and investors make in conjunction with Long-Term?
(a) 50 million.
(b) 1 million.
(c) 1-200 million.
(d) Several hundred thousand.

12. Who developed the Black-Scholes model?
(a) David Black.
(b) Jack Salomon.
(c) Myron Scholes.
(d) John Meriwether.

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

14. What did Long-Term expect foreign banks to invest?
(a) $10 million.
(b) Only individuals could invest.
(c) $1 million.
(d) $100 million.

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

Short Answer Questions

1. What did Black and Scholes use to calculate market change?

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

3. What year did Meriwether hire Myron Scholes?

4. Where did Meriwether work in 1979?

5. In 1994, what market did Long-Term begin to express an interest in?

(see the answer keys)

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