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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 notable company went bankrupt in the 1970's?
(a) Penn Central Railroad.
(b) Penn Weapons Industry.
(c) Penn Coal.
(d) Penn North Distillery.

2. What group did Meriwether found in 1977?
(a) The Commanders.
(b) The Arbitrage Group.
(c) The Meegen Group.
(d) Smith & Meriwether Co.

3. What hedge fund caused a pound devaluation in Europe but made over a billion dollars?
(a) Quantum Fund.
(b) Millenium Fund.
(c) Endowment Fund.
(d) Treasury Fund.

4. Who charged Long-Term much lower fees than other clients?
(a) NYSE.
(b) The Federal Reserve.
(c) Brokerage firms.
(d) The hospitality industry.

5. What did Long-Term do with off-the-run bonds?
(a) Avoid them.
(b) Unload them quickly.
(c) Loan them to other firms.
(d) Hold them for profit.

Short Answer Questions

1. What happened to Meriwether's Treasury bill deal before it was resolved?

2. What did the banks and investors use to estimate Long-Term's assets?

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

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

5. Who gains from working with hedge funds?

Short Essay Questions

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

2. Why are hedge funds considered low risk?

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

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

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

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

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

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

(see the answer keys)

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