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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) $50 million.
(c) There wasn't one.
(d) $100 million.

2. What was the internal climate at Long-Term in 1998?
(a) Deteriorating.
(b) The same as always.
(c) Positive.
(d) Negative.

3. What trading date dropped Long-Term below $1 billion in equity?
(a) April 15.
(b) September 21.
(c) October 10.
(d) September 5.

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

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

6. The purpose of the Federal Reserve System was to promote what?
(a) Local investments.
(b) Honest investments.
(c) Morality.
(d) Stability.

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

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

9. Who was the Fed Chairman in 1997?
(a) Hillary Clinton.
(b) Warren Buffet.
(c) Madeleine Albright.
(d) Alan Greenspan.

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

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

12. What regulation did Long-Term bypass when trading equities?
(a) Regulation-B.
(b) Regulation-T.
(c) Regulation-E.
(d) Regulation-C.

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

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

15. In 1996, why was it difficult to continue to find strong profits in arbitrage trades?
(a) The market did not have enough players.
(b) The market was over-saturated.
(c) Long-Term did not have investment capital.
(d) It was illegal to perform these trades.

Short Answer Questions

1. Where did the private contracts Long-Term made in 1998 trade?

2. When Russia began to default on its loans, what did people start doing with their high risk bonds?

3. What was the limitation on borrowing for equity trading?

4. What did Long-Term risk losing if they allowed their assets to fall below five hundred million dollars?

5. When the financial market in Russia collapsed, what were many in the market attempting to do?

(see the answer keys)

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