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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 did Rosenfeld and his friend develop?
(a) Software.
(b) A financial museum.
(c) Energy bars.
(d) Energy drinks.

2. In 1996, Long-Term had achieved thirty times its what?
(a) Original goal.
(b) Proposed value.
(c) Debt capacity.
(d) Starting capital.

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

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

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

Short Answer Questions

1. What unusual event happened when Meriwether began working with Treasury futures?

2. In 1996, Long-Term was two and a half times larger than what company?

3. How much did Long-Term earn in its first year of operation?

4. What did Black and Scholes think price changes were?

5. In bond trading, what are loans backed by collateral called?

Short Essay Questions

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

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

3. Why was Meriwether made a partner at Salomon?

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

5. What are relative value trades?

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

7. Why are hedge funds considered low risk?

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

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

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

(see the answer keys)

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