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

Multiple Choice Questions

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

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

3. What resource close to Long-Term began to experience financial difficulties following the financial problems in Russia?
(a) Long-Term's management company.
(b) Latin America.
(c) Italy.
(d) Long-Term's audit company.

4. What did the incident on August 21 cost Long-Term?
(a) $2 billion.
(b) $200 million.
(c) $1 billion.
(d) $150 million.

5. In 1998, what market did Long-Term bet would decline?
(a) The Latin market.
(b) The Russian market.
(c) The Asian market.
(d) The U.S. market.

6. By the end of August 1998, what market had practically stopped trading altogether?
(a) Stock markets.
(b) International markets.
(c) Bond markets.
(d) Gold markets.

7. What did Long-Term risk losing if they allowed their assets to fall below five hundred million dollars?
(a) Their workers.
(b) The right to trade.
(c) Their office.
(d) Their relationships with bankers.

8. What factor was forcing those with hedge funds to sell?
(a) Ample credit.
(b) Lack of credit.
(c) Toxic assets.
(d) The Fed's involvement.

9. In the mid-1990's, what was the ratio of leverage on Wall Street?
(a) 10-1.
(b) 100-1.
(c) 45-1.
(d) 25-1.

10. What determines the swap rate in a country?
(a) The price of oil.
(b) The price of corn.
(c) Interest rates on the real estate market.
(d) Interest rates on government debt.

11. What put pressure on the currency in Brazil?
(a) Goldman's bought out China's debt.
(b) Warren Buffet paid off Brazilian debt.
(c) Moody's downgraded Brazilian debt.
(d) The United State balanced the budget.

12. When the Fed visited Long-Term, what did Hilibrand show them?
(a) The new buildings.
(b) The door.
(c) The risk aggregator.
(d) His recent financial model.

13. What was the limitation on borrowing for equity trading?
(a) 40%.
(b) 25%.
(c) 50%.
(d) 10%.

14. What year was the Federal Reserve System created?
(a) 1950.
(b) 1901.
(c) 1995.
(d) 1913.

15. On what date did Russia declare a debt moratorium?
(a) August 31.
(b) August 17.
(c) July 4.
(d) September 30.

Short Answer Questions

1. In 1998, who published Meriwether's letter to his clients?

2. In 1998, what act led Long-Term to a fall?

3. What are some of the new markets Long-Term looked into in 1997?

4. Who did Long-Term threaten to sue, following a threat not to clear trades?

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

(see the answer keys)

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