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This test consists of 5 short answer questions, 10 short essay questions, and 1 (of 3) essay topics.

Short Answer Questions

1. What was the end result of Meriwether's Treasury bill deal?

2. How long did Long-Term expect their investors to commit?

3. In bond trading, what are loans backed by collateral called?

4. In 1994, why did the yield raise on the thirty year Treasury bond?

5. How much of the face value of a bond do buyers typically pay?

Short Essay Questions

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

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

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

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

5. Why are hedge funds considered low risk?

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

7. When Meriwether was building his team at the Arbitrage Group, what qualities did he look for?

8. Why was Meriwether made a partner at Salomon?

9. Why did hedge funds make money for managers?

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

Essay Topics

Write an essay for ONE of the following topics:

Essay Topic 1

The investment requirements of Long-Term were quite stringent. Citing examples from the text, write an essay examining the investment requirements and opportunity for return for potential Long-Term investors.

Essay Topic 2

When Long-Term was faced with financial turmoil, it took only five weeks for it to lose staggering amounts of money. Examine the following points:

1) What was the financial profile of Long-Term prior to Russia's debt default?

2) What did the financial profile change so drastically?

3) What moves did Long-Term make to correct the situation and why were they ineffective?

Essay Topic 3

When Long-Term achieved major profits in its first year, Meriwether wrote a letter to investors warning against such a strong future performance.

1) Why did Meriwether feel it was important to communicate with his investors?

2) What warnings did Meriwether share with his investors?

3) Why did Meriwether feel it necessary to communicate at this level?

(see the answer keys)

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