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Can You Pass Our Trader Test?

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On ‘Grade the Trade’ we test the trading prowess of some of the most promising business students in the nation. This week they’re from Purdue, Villanova and University of Florida. Get ready – school’s in session.

Our business school students have been given the questions in advance, and have 30 seconds to answer.

Grad #1: Kevin from the University of Florida Warrington College of Business Administration

Here’s the scenario:

In a possible scenario raised Wednesday by Merrill Lynch, Countrywide Financial (CFC), the biggest US mortgage lender, is forced by creditors to sell mortgage assets at rock bottom prices and is pushed into bankruptcy. What are you buying and what are you selling as this scenario unfolds?

Kevin is buying traditional lenders such as Freddie Mac (FRE), Fannie Mae (FNM) and Wells Fargo (WFC) as well as Bank of America (BAC) and Washington Mutual (WM). He’s selling DR Horton (DHI), KB Homes (KBH) and other companies which cater to first time homebuilders. And he’s buying Berkshire Hathaway (BRK).

Guy Adami gives Kevin a “B+”.

Symbol
Price
 
Change
%Change
NOVU
---
DHI
---
KBH
---
WFC
---
WM
---

Grad #2: Dennis from Villanova University School of Business

Here’s the scenario:

Tropical Storm Dean becomes a category 3 hurricane, then heads through the Gulf of Mexico and hits Houston next week. What are you buying and what are you selling as this scenario unfolds?

Dennis is shorting airlines including Continental (CAL) and Southwest (LUV) which have major Houston hubs. He’s also shorting petro-chem companies such as Dow (DOW), Lyondell (LYO) and more. Finally he’s buying Halliburton (HAL),Fluor Corp (FLR) and more for reconstruction.

Pete Najarian gives Dennis an "A."

Symbol
Price
 
Change
%Change
DOW
---
FLR
---
HAL
---
LUV
---

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Got something to say? Send us an e-mail at fastmoney-web@cnbc.com and your comment might be posted on the Rapid Recap! Prefer to keep it between us? You can still send questions and comments to fastmoney@cnbc.com.

Trader disclosure: On Aug 15 2007, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money Macke Owns (EMC), (JWN) Najarian Is Short (CFC), (GS), Seymour Owns (X), (EEM), Seymour Is Short (LEH), Red Star Asset Management Owns (MBT), Red Star Asset Management Is Short (EEM)