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

Multiple Choice Questions

1. What did Long-Term think about the financial crisis that hit in August of 1998?
(a) It was not serious.
(b) It was not serious but would not recover.
(c) It was serious and would not recover.
(d) It was serious but would recover.

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

3. What notable player was on vacation during the crisis in Russia?
(a) The president of Russia.
(b) Alan Greenspan.
(c) The president of the United States.
(d) Warren Buffet.

4. Who suspended arbitrage operations in April 1998?
(a) Goldman Sachs.
(b) Fidelity Bank and Trust.
(c) Salomon.
(d) Chase.

5. What was the result for some banks due to their involvement in the derivatives market?
(a) They were nationally recognized.
(b) They made billions.
(c) They were prosecuted.
(d) They went bankrupt.

6. In 1997, who awarded Long-Term the loan warrant it had requested?
(a) The Cayman Islands Commons.
(b) Bank of America.
(c) Chase.
(d) Union Bank of Switzerland.

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

8. In its first bad year, what did Long-Term maintain?
(a) A strong energy.
(b) A great workforce.
(c) A good reputation.
(d) All of these.

9. When did Long-Term start losing money?
(a) When the Asian market collapsed.
(b) When arbitrage operations were suspended.
(c) When Warren Buffet spoke out against Long-Term.
(d) When Meriwether opened a new company.

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

11. What was the dollar amount of the premium Long-Term paid for its loan?
(a) $289 million.
(b) $100 million.
(c) $200 million.
(d) $1 billion.

12. After the meeting with the Fed, a market movement of what percentage could have ended Long-Term?
(a) 1%.
(b) 25%.
(c) 10%.
(d) 30%.

13. Who was withdrawing from the hedge fund markets?
(a) Long-Term.
(b) Large investment firms.
(c) Foreign countries.
(d) Small investment firms.

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

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

Short Answer Questions

1. In the mid-1990's, what was the ratio of leverage on Wall Street?

2. Why was Long-Term unable to get out of the situation with Russia?

3. In 1996, what was Meriwether encouraging Long-Term to do?

4. What was the climate at Long-Term during the Russian financial crisis?

5. To create a paired-share, what is common stock partnered with?

(see the answer keys)

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