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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 year was the Federal Reserve System created?
(a) 1995.
(b) 1913.
(c) 1950.
(d) 1901.

2. Who threatened to stop clearing the trades at Long-Term if their fund fell below a particular amunt?
(a) Bear Sterns.
(b) Fidelity.
(c) Goldman Sachs.
(d) Chase.

3. Who was withdrawing from the hedge fund markets?
(a) Small investment firms.
(b) Foreign countries.
(c) Long-Term.
(d) Large investment firms.

4. How many banks stepped forward to help bail out Long-Term?
(a) 20.
(b) 30.
(c) 16.
(d) 2.

5. At what level was the swap rate of the United States in April 1998?
(a) Non-existant.
(b) Medium.
(c) Low.
(d) High.

Short Answer Questions

1. What did the Fed Chairman want to remove in an effort to create liquidity in the market?

2. What was Long-Term's signature trade based on?

3. What was the first horrible month Long-Term had?

4. When did Long-Term begin scrambling to raise money?

5. How much equity did Long-Term have hold of in 1997?

Short Essay Questions

1. What contributes to the estimation of market volatility?

2. How much of Long-Term did the Union Bank of Switzerland buy on a hedge?

3. What did the Fed determine would happen if Long-Term failed?

4. When Meriwether reached out to his clients following the Russian crisis, how did he explain the effect of the situation in Russia?

5. What was the financial climate when Merton and Scholes were awarded the Nobel Prize?

6. What move did Salomon make that surprised Long-Term?

7. What was the risk to the market if Long-Term unraveled?

8. Why did banks and investment banks get involved in the derivatives market?

9. What was the Fed's response to Long-Term's exposure?

10. During the financial crisis in 1998, where were the partners finding money?

(see the answer keys)

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