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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. Who did most funds have to be registered with?
(a) The Fed.
(b) Most funds did not have to be registered.
(c) SEC.
(d) CFTC.

2. How much did the accounts for investors increase in 1994?
(a) 5%.
(b) 50%.
(c) 20%.
(d) 10%.

3. What did banks and investors want from Long-Term?
(a) It to shut down.
(b) To be involved.
(c) Client referrals.
(d) Regulation.

4. What type of government paper was bought in Italy?
(a) Floating rate.
(b) Deeds to monuments.
(c) Fluctuating rate.
(d) Italian money.

5. Once in business, what did Long-Term have an easy time getting from banks?
(a) Personal information.
(b) Workers.
(c) Endorsements.
(d) Money.

Short Answer Questions

1. What did the Black-Scholes model believe was constant?

2. In the 1970's, what type of trading was considered dull?

3. What were popular pools in 1993?

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

5. In 1996, how much did Long-Term have in assets?

Short Essay Questions

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

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

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

4. Why did Meriwether begin recruiting employees he had worked with at the Arbitrage Group?

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

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

7. Although Long-Term was performing so well by 1996, how many Americans knew of the fund's existence?

8. What are relative value trades?

9. What did the Black-Scholes model help Long-Term to predict?

10. Why did bonds lose their value in the 1970's?

(see the answer keys)

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