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

Multiple Choice Questions

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

2. What was Long-Term's signature trade?
(a) The "small build".
(b) The "mort up".
(c) The "equity vol".
(d) The "shining cat".

3. What word did people often use to describe Long-Term?
(a) Stupid.
(b) Communist.
(c) Genius.
(d) Dangerous.

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

5. How much equity did Long-Term have hold of in 1997?
(a) $1 billion.
(b) $100 million.
(c) $0.
(d) $5 billion.

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

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

8. During the turmoil of 1998, investors avoided Long-Term because they were trying to avoid what?
(a) Long range trades.
(b) Exceptional trades.
(c) Scientific trades.
(d) Short term trades.

9. To create a paired-share, what is common stock partnered with?
(a) Shorted stocks.
(b) Private stock.
(c) Bond deals.
(d) Preferred stock.

10. In 1998, what act led Long-Term to a fall?
(a) Putting money into Italy.
(b) Shorting the Russian market.
(c) Investing in the Asian market.
(d) Shorting the U.S. market.

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

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

13. Who threatened to stop clearing the trades at Long-Term if their fund fell below a particular amunt?
(a) Goldman Sachs.
(b) Chase.
(c) Bear Sterns.
(d) Fidelity.

14. In August 1998, how far down was Long-Term for the year-to-date?
(a) 52%.
(b) 2%.
(c) 10%.
(d) 35%.

15. In August 1998, how far down was Long-Term for the month?
(a) 10%.
(b) 44%.
(c) 25%.
(d) 60%.

Short Answer Questions

1. When the Fed visited Long-Term, what did Hilibrand show them?

2. If the Long-Term fund failed, what would counter parties have to do?

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

4. When Long-Term met with the Fed, it was obvious they did not have enough money to make it through what?

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

(see the answer keys)

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