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

Multiple Choice Questions

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

2. What was the climate at Long-Term during the Russian financial crisis?
(a) Nervous.
(b) Excited.
(c) Standard.
(d) Confident.

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

4. What was the leverage of Long-Term, following its meeting with the Fed?
(a) 10-1.
(b) 50-1.
(c) 25-1.
(d) 100-1.

5. What companies were selling bonds for Russia?
(a) Black market traders.
(b) Investment banking firms.
(c) Mom and pop establishments.
(d) All of these.

6. When Russia began to default on its loans, what did people start doing with their high risk bonds?
(a) Selling.
(b) Holding.
(c) Buying.
(d) Trading.

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

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

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

10. 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.

11. In 1998, who published Meriwether's letter to his clients?
(a) The New Yorker.
(b) The Financial Times.
(c) Bloomberg.
(d) The New York Times.

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

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

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

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

Short Answer Questions

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

2. During the financial crisis in 1998, what did the partners keep from the workers?

3. Who was the Fed Chairman in 1997?

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

5. What typically happens to stock prices when a merger is revealed?

(see the answer keys)

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