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

Multiple Choice Questions

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

2. 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.

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

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

5. If the Long-Term fund failed, what would counter parties have to do?
(a) Sell.
(b) Nothing.
(c) Give it money to keep going.
(d) Buy more stocks.

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

7. Who did Long-Term threaten to sue, following a threat not to clear trades?
(a) ING trading.
(b) Waterhouse Cooper.
(c) Bear Sterns.
(d) Chase.

8. Why was Long-Term unable to get out of the situation with Russia?
(a) Russia would not let them.
(b) They had too much money.
(c) Their investments were not liquid.
(d) They did not want to.

9. How many banks stepped forward to help bail out Long-Term?
(a) 16.
(b) 30.
(c) 2.
(d) 20.

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

11. After the first bad year experienced by Long-Term, what did its overall record look like?
(a) Mediocre.
(b) Fantastic.
(c) Typical.
(d) Terrible.

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

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

14. Where did the private contracts Long-Term made in 1998 trade?
(a) Privately.
(b) On the exchange.
(c) Overseas.
(d) In Russia.

15. In 1996, what was Meriwether encouraging Long-Term to do?
(a) Stick with the tried and true.
(b) Investigate new territory.
(c) Hire new employees.
(d) Break the law.

Short Answer Questions

1. What factor was forcing those with hedge funds to sell?

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

3. On what date did Russia declare a debt moratorium?

4. What trading date dropped Long-Term below $1 billion in equity?

5. In 1998, what were many hedge funds selling insurance against?

(see the answer keys)

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