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This test consists of 5 multiple choice questions, 5 short answer questions, and 10 short essay questions.

Multiple Choice Questions

1. Why did Rosenfeld choose not to co-found Kapor's project?
(a) He was competitive with Kapor.
(b) He was too interested in travel.
(c) He was too interested in finance.
(d) He did not like Kapor.

2. Who developed the Black-Scholes model?
(a) David Black.
(b) Jack Salomon.
(c) Myron Scholes.
(d) John Meriwether.

3. What was Meriwether's team allowed to do, following the Treasury bill deal?
(a) Spread trades.
(b) Vacation in Italy.
(c) Coach the office.
(d) Set Treasury standards.

4. In the 1970's, what type of trading was considered dull?
(a) Securities.
(b) Gasoline.
(c) Corn.
(d) Bond.

5. In 1996, how much did Long-Term have in assets?
(a) $1 billion.
(b) $500 million.
(c) $140 billion.
(d) $120 million.

Short Answer Questions

1. What type of funds gained popularity in the 1990's?

2. In 1996, Long-Term was four times as large as what?

3. In order for Meriwether's Treasury futures investment to work, what did he need market prices to do?

4. What was the typical scenario for bond investors in 1994?

5. During the time period in "Hedge Fund", how many people were millionaires due to the stock market?

Short Essay Questions

1. What are relative value trades?

2. Why was the investment in Italy a risky one for Long-Term to make?

3. By the time Long-Term had been in business for two years, how did it compare to other old Wall Street companies?

4. When investing in Italy, what did Long-Term avoid telling their customers?

5. What was Meriwether's business model for Long-Term?

6. What were the legal limits on hedge fund investors?

7. Why was it difficult to know the exact amount of assets Long-Term held?

8. What methods did Black and Scholes use to predict the changes that would take place in the market?

9. What was Long-Term's objective in seeking out a bank to finance their credit?

10. What dictates whether or interest only securities rise or fall?

(see the answer keys)

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