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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 financial crisis did Long-Term make it through that most of the market didn't?
(a) The Germany crisis.
(b) The U.S. crisis.
(c) The Mexican crisis.
(d) The Switzerland crisis.

2. In 1996, what was Long-Term seeking from the bank that would handle their credit?
(a) Legitimacy.
(b) Cash flow.
(c) Asset storage.
(d) Tax shelter.

3. What were popular pools in 1993?
(a) Electricity.
(b) Oil.
(c) Green energy.
(d) Mortgage.

4. How much money did Meriwether need to start Long-Term?
(a) $1 billion.
(b) $2.5 billion.
(c) $100,000.
(d) $50 million.

5. In order for Meriwether's Treasury futures investment to work, what did he need market prices to do?
(a) Converge.
(b) None of these.
(c) Remain the same.
(d) Fluctuate drastically.

Short Answer Questions

1. In 1996, Long-Term had achieved thirty times its what?

2. Meriwether was threatened with what, if his Treasury bill deal did not pan out?

3. What was J.F. Eckstein & Co. primarily working on in 1979?

4. How many employees were with Long-Term in 1996?

5. What were the models Long-Term used unable to predict?

Short Essay Questions

1. What are relative value trades?

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

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

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

5. Why did Meriwether increase his position on Treasury Bill futures in spite of the market fluctuation?

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

7. When additional investors returned to the Italian market, what did Long-Term do?

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

9. When Meriwether was building his team at the Arbitrage Group, what qualities did he look for?

10. What was Meriwether's group at Salomon given the authority to do?

(see the answer keys)

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