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This test consists of 15 multiple choice questions and 5 short answer questions.

Multiple Choice Questions

1. What hedge fund caused a pound devaluation in Europe but made over a billion dollars?
(a) Treasury Fund.
(b) Millenium Fund.
(c) Quantum Fund.
(d) Endowment Fund.

2. In 1993, what was happening more than usual in America?
(a) Refinancing.
(b) Starvation.
(c) Day trading.
(d) Bankruptcy.

3. Who typically invested in hedge funds?
(a) The Federal Reserve.
(b) Foreign banks.
(c) The general population.
(d) A club of exclusive investors.

4. In bond trading, what are loans backed by collateral called?
(a) Mini trades.
(b) Exclusive trades.
(c) Repo financing.
(d) Fair financing.

5. In 1996, Long-Term had achieved thirty times its what?
(a) Proposed value.
(b) Debt capacity.
(c) Starting capital.
(d) Original goal.

6. What level of risk did Long-Term offer?
(a) High.
(b) Medium.
(c) Low.
(d) None.

7. Where were Italian bonds sold by Long-Term?
(a) Under the table.
(b) Cayman Islands.
(c) Directly to investors.
(d) Swaps.

8. Where did Meriwether work in 1979?
(a) Long-Term.
(b) Lehman.
(c) Salomon Brothers.
(d) Merrill Lynch.

9. What did the Black-Scholes model believe was constant?
(a) Income.
(b) Volatility.
(c) Meriwether's enthusiasm.
(d) Growth.

10. Who ran the London office for Long-Term?
(a) Mullins.
(b) Buffet.
(c) Haghani.
(d) Meriwether.

11. What type of funds gained popularity in the 1990's?
(a) Treasury.
(b) Real estate.
(c) Value.
(d) Mutual.

12. Who helped Meriwether raise money for Long-Term?
(a) Salomon Brothers.
(b) Merrill Lynch.
(c) Warren Buffet.
(d) No one.

13. In 1996, what was the second bank Long-Term approached about financing their credit?
(a) National Bank of Russia.
(b) The Italian Republic of Banks.
(c) International Banking System.
(d) Union Bank of Switzerland.

14. How much money did Meriwether need to start Long-Term?
(a) $50 million.
(b) $100,000.
(c) $2.5 billion.
(d) $1 billion.

15. What did the banks and investors use to estimate Long-Term's assets?
(a) Their exposure.
(b) History of investments.
(c) Net worth of investors.
(d) All of these.

Short Answer Questions

1. What company was Kapor the founder of?

2. What did banks and investors want from Long-Term?

3. What financial crisis did Long-Term make it through that most of the market didn't?

4. Who developed the Black-Scholes model?

5. How much did Long-Term earn in its first year of operation?

(see the answer keys)

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