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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. The purpose of the Federal Reserve System was to promote what?

2. After the financial crisis in Russia, what did Long-Term regret?

3. What did Scholes and Merton think of some of the private trades Long-Term made in 1998?

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

5. Once crisis hit, how many weeks did it take for the partners to lose $3.6 billion?

Short Essay Questions

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

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

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

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

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

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

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

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

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

10. What did the Fed determine would happen if Long-Term failed?

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

Write a brief essay supporting or refuting the following statement, citing examples from the text: Meriwether fully expected to continue making substantial returns with Long-Term's investment model.

Essay Topic 3

Occasionally, Long-Term encountered a trading regulation that was designed to prevent them from over-leveraging. In many of these situations, they would find a way to sidestep the regulation. Write an essay that takes a stand on this type of behavior and identify at least three examples from the text in your work.

(see the answer keys)

This section contains 550 words (approx. 2 pages at 300 words per page) View a FREE sample