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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 was the result for some banks due to their involvement in the derivatives market?
(a) They went bankrupt.
(b) They were nationally recognized.
(c) They made billions.
(d) They were prosecuted.

2. In 1998, who published Meriwether's letter to his clients?
(a) The Financial Times.
(b) The New York Times.
(c) Bloomberg.
(d) The New Yorker.

3. What determines the swap rate in a country?
(a) The price of oil.
(b) Interest rates on government debt.
(c) Interest rates on the real estate market.
(d) The price of corn.

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

5. What typically happens to stock prices when a merger is revealed?
(a) They go down.
(b) They go up.
(c) They crash.
(d) They stay the same.

Short Answer Questions

1. When markets get jumpy, what begins to rise?

2. During the turmoil of 1998, investors avoided Long-Term because they were trying to avoid what?

3. How did regulators respond to the involvement of banks in the derivatives market?

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

5. What regulation did Long-Term bypass when trading equities?

Short Essay Questions

1. What was the goal of the Federal Reserve when it was created?

2. In 1997, what was Meriwether encouraging his employees to do?

3. Why were regulators concerned about the volume of banks and investment banks involved in the derivatives market?

4. Since Long-Term expected stock prices would fall, what did they sell insurance against?

5. Following the financial crisis in Russia, what did the partners do to begin raising money?

6. What did Standard & Poor downgrade that would affect Long-Term significantly?

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

8. By the end of August 1998, what did the movement in the bond market look like?

9. Who was Jon Corzine?

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

(see the answer keys)

This section contains 494 words (approx. 2 pages at 300 words per page) View a FREE sample