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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. What regulation did Long-Term bypass when trading equities?

2. After the first bad year experienced by Long-Term, what did its overall record look like?

3. What was the limitation on borrowing for equity trading?

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

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

Short Essay Questions

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

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

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

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

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

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

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

8. What was the financial climate when Merton and Scholes were awarded the Nobel Prize?

9. What contributes to the estimation of market volatility?

10. When Meriwether reached out to his clients following the Russian crisis, how did he explain the effect of the situation in Russia?

Essay Topics

Write an essay for ONE of the following topics:

Essay Topic 1

As Long-Term became more and more successful, many banks and investment firms were eager to work with the company. Examine the various ways banks and investment firms offered advantages to Long-Term and why.

Essay Topic 2

When Long-Term achieved major profits in its first year, Meriwether wrote a letter to investors warning against such a strong future performance.

1) Why did Meriwether feel it was important to communicate with his investors?

2) What warnings did Meriwether share with his investors?

3) Why did Meriwether feel it necessary to communicate at this level?

Essay Topic 3

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.

(see the answer keys)

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