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

Multiple Choice Questions

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

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

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

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

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

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

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

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

9. What did Long-Term do with off-the-run bonds?
(a) Avoid them.
(b) Unload them quickly.
(c) Hold them for profit.
(d) Loan them to other firms.

10. What hedge fund caused a pound devaluation in Europe but made over a billion dollars?
(a) Endowment Fund.
(b) Quantum Fund.
(c) Treasury Fund.
(d) Millenium Fund.

11. In 1996, how much did Long-Term have in assets?
(a) $500 million.
(b) $1 billion.
(c) $120 million.
(d) $140 billion.

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

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

14. What was Meriwether's team allowed to do, following the Treasury bill deal?
(a) Spread trades.
(b) Coach the office.
(c) Set Treasury standards.
(d) Vacation in Italy.

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

Short Answer Questions

1. What did Meriwether do with his staff?

2. In 1993, what was happening more than usual in America?

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

4. In 1996, Long-Term was two and a half times larger than what company?

5. Meriwether believed that risk and volatility were what?

(see the answer keys)

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