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This quiz consists of 5 multiple choice and 5 short answer questions through Part 1: Chapter 4, Merge with Mike.

Multiple Choice Questions

1. Why did Drexel remain a privately-held company?
(a) Joseph refused to allow it to happen.
(b) Milken could then retain his need for secrecy.
(c) They did not want outsiders to get in on their business.
(d) It was too much of a temptation for a hostile takeover.

2. By 1981, what was Drexel responsible for?
(a) leading the field in high interest bonds
(b) engineering most of the hostile takeovers
(c) moving Wall Street to Los Angeles
(d) almost all of the junk bonds in the market

3. What advantage did Milken's kind of debt offer?
(a) It was done under the table so the banks did not know about it.
(b) It did not tie up cash the way loan repayments did.
(c) It was separate from bank loans and the bondholder could sell his bonds whenever he wanted
(d) It was easier to use than getting a bank loan.

4. What commission did Drexel make on these funds?
(a) five eighths of a percent
(b) three quarters of a percent
(c) one percent
(d) seven eighths of a percent

5. What was the Wall Street attitude toward low grade bonds at the time Milken started trading in them?
(a) Then were used for scratch paper.
(b) They were looked down on.
(c) They were unknown to Wall Street.
(d) They were used as charitable donations.

Short Answer Questions

1. Why was Milken so interested in low grade bonds?

2. To troubled businesses, what was Drexel's unregistered exchange offer?

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

4. What was Fred Joseph's strategy for hiring employees for Drexel?

5. Why did Drexel Burnham Lambert agree to let Milken move his operation at a cost of millions of dollars?

(see the answer key)

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