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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. To create a paired-share, what is common stock partnered with?
(a) Private stock.
(b) Preferred stock.
(c) Shorted stocks.
(d) Bond deals.

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) Another big hit.
(c) A debt call from Russia.
(d) The following week.

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

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

5. The purpose of the Federal Reserve System was to promote what?
(a) Stability.
(b) Honest investments.
(c) Morality.
(d) Local investments.

Short Answer Questions

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

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

3. If the Long-Term fund failed, what would counter parties have to do?

4. Who did Long-Term threaten to sue, following a threat not to clear trades?

5. How many banks stepped forward to help bail out Long-Term?

Short Essay Questions

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

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

3. Who was Jon Corzine?

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

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

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

7. In 1997, what was Meriwether encouraging his employees to do?

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

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

10. By the end of August 1998, what did the movement in the bond market look like?

(see the answer keys)

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