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

2. Where was David W. Mullins working when Meriwether hired him?
(a) The United Nations.
(b) Salomon Brothers.
(c) Yale School of Finance.
(d) Federal Reserve.

3. What did the traders accept about the financial models they used?
(a) They were smarter than humans.
(b) They were expensive.
(c) They removed the element of surprise.
(d) They were imperfect.

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

5. What was J.F. Eckstein & Co. primarily working on in 1979?
(a) Bonds.
(b) IO's.
(c) Stocks.
(d) Treasury Bill futures.

Short Answer Questions

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

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

3. What is the CFTC short for?

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

5. In 1996, what was the response of most of the banks in terms of offering credit financing to Long-Term?

Short Essay Questions

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

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

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

4. How did Long-Term respond to firms that would not waive the fee for the haircut?

5. In 1996, which significant companies did Long-Term surpass in terms of assets?

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

7. How would a loan from a major bank help the partners at Long-Term make money?

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

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

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

(see the answer keys)

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