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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. Who was withdrawing from the hedge fund markets?

2. On what date did Russia declare a debt moratorium?

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

4. Where did the private contracts Long-Term made in 1998 trade?

5. Once the financial market in Russia collapsed, what did people stop trading?

Short Essay Questions

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

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

3. Why did the issue in Russia cost Long-Term money on an initial basis?

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

5. Following the crisis in Russia, what position did investors take that adversely affected Long-Term?

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

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

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

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

10. What did Long-Term do when they expected stock prices to fall?

Essay Topics

Write an essay for ONE of the following topics:

Essay Topic 1

Write a brief essay supporting or refuting the following statement, citing examples from the text: Long-Term set out to be a low risk company and exemplified that mission for several years.

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

Examine one of the following forms of investment vehicles:

- Hedge funds.

- Value funds.

- Bonds.

Answering the follow questions:

- What are the principals of this form of investment?

- What was Meriwether's experience with this form of investment?

- To what extent did the general public participate in this form of investment?

(see the answer keys)

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