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This test consists of 5 multiple choice questions, 5 short answer questions, and 10 short essay questions.

Multiple Choice Questions

1. What did Long-Term avoid by working with derivatives instead of stocks?
(a) Profit.
(b) Disclosure.
(c) Fees.
(d) Outside interest.

2. 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.

3. How much money did Chase loan Long-Term so that they could continue to clear trades?
(a) $5 million.
(b) $10 million.
(c) $752 million.
(d) $475 million.

4. When Russia began to default on its loans, what did people start doing with their high risk bonds?
(a) Buying.
(b) Selling.
(c) Holding.
(d) Trading.

5. What was the internal climate at Long-Term in 1998?
(a) Negative.
(b) Positive.
(c) The same as always.
(d) Deteriorating.

Short Answer Questions

1. What word did people often use to describe Long-Term?

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

3. In 1997, who awarded Long-Term the loan warrant it had requested?

4. What determines the swap rate in a country?

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

Short Essay Questions

1. Who was Jon Corzine?

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

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

4. Why did banks and investment banks get involved in the derivatives market?

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

6. What contributes to the estimation of market volatility?

7. Who warned Long-Term about making trades that counted on falling stock prices?

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

9. What move did Salomon make that surprised Long-Term?

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

(see the answer keys)

This section contains 480 words (approx. 2 pages at 300 words per page) View a FREE sample