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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 regulation did Long-Term bypass when trading equities?
(a) Regulation-T.
(b) Regulation-C.
(c) Regulation-E.
(d) Regulation-B.

2. How much money did Chase loan Long-Term so that they could continue to clear trades?
(a) $5 million.
(b) $752 million.
(c) $10 million.
(d) $475 million.

3. In 1997, who awarded Long-Term the loan warrant it had requested?
(a) The Cayman Islands Commons.
(b) Bank of America.
(c) Chase.
(d) Union Bank of Switzerland.

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

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

Short Answer Questions

1. When did the Russian market begin to fail?

2. What was the dollar amount of the premium Long-Term paid for its loan?

3. In 1998, what were many hedge funds selling insurance against?

4. When the financial market in Russia collapsed, what were many in the market attempting to do?

5. What did Long-Term think about the financial crisis that hit in August of 1998?

Short Essay Questions

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

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

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

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

5. In terms of the spreads in 1998, what was the difference between what Long-Term expected them to do and what they actually did?

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

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

8. Who was Jon Corzine?

9. What strategy led to Long-Term's downfall during the Russian financial crisis?

10. Who warned Long-Term about making trades that counted on falling stock prices?

(see the answer keys)

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