View a FREE sample

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

Multiple Choice Questions

1. At what level was the swap rate of the United States in April 1998?
(a) High.
(b) Low.
(c) Medium.
(d) Non-existant.

2. When Russia first experienced turmoil, Long-Term was confident that what would happen?
(a) The country would recover.
(b) Spreads would converge.
(c) Spreads would never meet.
(d) Investors would back out.

3. What was the leverage of Long-Term, following its meeting with the Fed?
(a) 100-1.
(b) 10-1.
(c) 25-1.
(d) 50-1.

4. In 1998, Long-Term expected prices to do what?
(a) Stay the same.
(b) Rise.
(c) Fall.
(d) Fluctuate.

5. What did Scholes and Merton think of some of the private trades Long-Term made in 1998?
(a) They were excited.
(b) They did not support them.
(c) They supported them.
(d) They were impressed.

6. What typically happens to stock prices when a merger is revealed?
(a) They go down.
(b) They crash.
(c) They stay the same.
(d) They go up.

7. How did regulators respond to the involvement of banks in the derivatives market?
(a) They were delighted.
(b) They were worried.
(c) There were not concerned.
(d) They encouraged it.

8. When Long-Term met with the Fed, it was obvious they did not have enough money to make it through what?
(a) Another big hit.
(b) The fall of China.
(c) The following week.
(d) A debt call from Russia.

9. In a letter to clients, to what did Long-Term attribute the decrease in profits?
(a) Foolish investments.
(b) Irresponsibility in foreign nations.
(c) Poor margins.
(d) Widening spreads.

10. After the Russian financial crisis, what caused further fluctuations in the market?
(a) Interest from the IRS.
(b) Panicked investors.
(c) Interest from big oil.
(d) Small time investors.

11. When did the Russian market begin to fail?
(a) May 1998.
(b) September 1998.
(c) August 1998.
(d) April 1998.

12. What was the credit limit on hedge funds?
(a) $100 million.
(b) $1 billion.
(c) There wasn't one.
(d) $50 million.

13. What was the first horrible month Long-Term had?
(a) It never had a horrible month.
(b) August, 1998.
(c) June, 1998.
(d) July, 1998.

14. In 1998, what were many hedge funds selling insurance against?
(a) Falling prices.
(b) The U.S. Treasury.
(c) The Latin market.
(d) Rising prices.

15. After the financial crisis in Russia, what did Long-Term regret?
(a) All of these.
(b) Forcing investors to take back money.
(c) Creating deals that were not liquid.
(d) Creating private deals.

Short Answer Questions

1. What was Long-Term's signature trade based on?

2. After the first bad year experienced by Long-Term, what did its overall record look like?

3. When did Long-Term begin scrambling to raise money?

4. What regulation did Long-Term bypass when trading equities?

5. After the meeting with the Fed, a market movement of what percentage could have ended Long-Term?

(see the answer keys)

This section contains 404 words (approx. 2 pages at 300 words per page) View a FREE sample