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This quiz consists of 5 multiple choice and 5 short answer questions through Part 1: Chapter 5, The Cloister at Wilshire and Rodeo.

Multiple Choice Questions

1. By 1986, who was the largest stockholder in Drexel Burnham Lambert?
(a) the Milken Family Trust
(b) Michael Milken
(c) Grace Milken
(d) Lowell Milken

2. Why did the stripped bonds result in large tax benefits?
(a) without the coupons the securities were untraceable
(b) no law covered the stripped Treasury security
(c) those sales did not have to be reported as income
(d) stripping the securities left them worthless

3. Why was Milken so interested in low grade bonds?
(a) equity offerings were not an option for the Drexel Burnham market
(b) they were the only ones he really understood
(c) that was all he could afford
(d) he liked to gamble big time

4. What was Fred Joseph's strategy for hiring employees for Drexel?
(a) overhiring to learn which are the ones to keep
(b) getting recommendations from bigger firms
(c) paying higher commissions than anyone else
(d) hiring from the smaller firms so that they saw it as a step up

5. Who dominated the market in junk bond funds from 1978 on?
(a) Lehman Brothers
(b) Morgan Investments
(c) Drexel
(d) Fidelity

Short Answer Questions

1. How did Milken break into the Las Vegas gambling business community?

2. When were the tax laws changed to minimize the benefits of stripping?

3. What did Milken and Joseph devise to keep business flowing during the recession?

4. Who was Dr. Feelgood of Drexel?

5. How did the firm now have equity stakes in most of the companies that it financed?

(see the answer key)

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