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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. What type of funds gained popularity in the 1990's?
(a) Value.
(b) Treasury.
(c) Mutual.
(d) Real estate.

2. In 1996, what was the second bank Long-Term approached about financing their credit?
(a) International Banking System.
(b) Union Bank of Switzerland.
(c) The Italian Republic of Banks.
(d) National Bank of Russia.

3. What happened to Meriwether's Treasury bill deal before it was resolved?
(a) Big losses.
(b) It fell apart.
(c) Huge gains.
(d) It remained steady.

4. What is the CFTC short for?
(a) Counting Futures Trading Commodities.
(b) Commodities Futures Trading Commission.
(c) Capitalism Fortune Trust Commonwealth.
(d) Commodities Finding True Commission.

5. During the time period in "Hedge Fund", how many people were millionaires due to the stock market?
(a) 1 million.
(b) 6 million.
(c) 5 million.
(d) 20 million.

Short Answer Questions

1. Once in business, what did Long-Term have an easy time getting from banks?

2. What did Black and Scholes use to calculate market change?

3. What financial crisis did Long-Term make it through that most of the market didn't?

4. What did Meriwether do with his staff?

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

Short Essay Questions

1. What did Long-Term do to limit risk in bond trading?

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

3. What surprise happened when Meriwether was trading Treasury Bill futures?

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

5. On what did Long-Term base the claim that it was difficult to lose money with them?

6. Why did hedge funds make money for managers?

7. What are relative value trades?

8. Why did Black and Scholes believe that price changes were random?

9. When did Meriwether begin making sales calls for Long-Term?

10. Why are hedge funds considered low risk?

(see the answer keys)

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