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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. When Russia began to default on its loans, what did people start doing with their high risk bonds?

2. In August 1998, how far down was Long-Term for the month?

3. What year was the Federal Reserve System created?

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

5. At what level was the swap rate of the United States in April 1998?

Short Essay Questions

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

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

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

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

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

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

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

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

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

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

Essay Topics

Write an essay for ONE of the following topics:

Essay Topic 1

Those involved at the top levels of Long-Term were given respect, money and opportunity. Write a brief essay analyzing some of the advantages a career at Long-Term gave many of the partners, citing examples from the text.

Essay Topic 2

As Long-Term became more and more successful, many banks and investment firms were eager to work with the company. Examine the various ways banks and investment firms offered advantages to Long-Term and why.

Essay Topic 3

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.

(see the answer keys)

This section contains 497 words (approx. 2 pages at 300 words per page) View a FREE sample