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

Multiple Choice Questions

1. In 1998, who published Meriwether's letter to his clients?
(a) Bloomberg.
(b) The Financial Times.
(c) The New York Times.
(d) The New Yorker.

2. When Long-Term met with the Fed, it was obvious they did not have enough money to make it through what?
(a) The fall of China.
(b) The following week.
(c) Another big hit.
(d) A debt call from Russia.

3. On what date did Russia declare a debt moratorium?
(a) September 30.
(b) August 31.
(c) August 17.
(d) July 4.

4. In 1997, who awarded Long-Term the loan warrant it had requested?
(a) Chase.
(b) Union Bank of Switzerland.
(c) Bank of America.
(d) The Cayman Islands Commons.

5. How many banks stepped forward to help bail out Long-Term?
(a) 20.
(b) 2.
(c) 16.
(d) 30.

6. After the meeting with the Fed, a market movement of what percentage could have ended Long-Term?
(a) 25%.
(b) 1%.
(c) 10%.
(d) 30%.

7. What notable player was on vacation during the crisis in Russia?
(a) The president of Russia.
(b) Warren Buffet.
(c) The president of the United States.
(d) Alan Greenspan.

8. What did Scholes and Merton think of some of the private trades Long-Term made in 1998?
(a) They were impressed.
(b) They were excited.
(c) They supported them.
(d) They did not support them.

9. What was Long-Term's signature trade based on?
(a) Consistency of failure.
(b) None of these.
(c) Consistency of volatility.
(d) Consistency of investments.

10. In the mid-1990's, what was the ratio of leverage on Wall Street?
(a) 45-1.
(b) 10-1.
(c) 25-1.
(d) 100-1.

11. When the Fed visited Long-Term, what did Hilibrand show them?
(a) His recent financial model.
(b) The risk aggregator.
(c) The door.
(d) The new buildings.

12. Who was the Fed Chairman in 1997?
(a) Alan Greenspan.
(b) Hillary Clinton.
(c) Madeleine Albright.
(d) Warren Buffet.

13. In 1996, why was it difficult to continue to find strong profits in arbitrage trades?
(a) The market did not have enough players.
(b) The market was over-saturated.
(c) It was illegal to perform these trades.
(d) Long-Term did not have investment capital.

14. In 1998, Long-Term expected prices to do what?
(a) Fall.
(b) Fluctuate.
(c) Rise.
(d) Stay the same.

15. What was the leverage of Long-Term, following its meeting with the Fed?
(a) 50-1.
(b) 10-1.
(c) 25-1.
(d) 100-1.

Short Answer Questions

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

2. After the Russian financial crisis, what caused further fluctuations in the market?

3. In 1998, what act led Long-Term to a fall?

4. What was the first horrible month Long-Term had?

5. What was Long-Term's signature trade?

(see the answer keys)

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