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This quiz consists of 5 multiple choice and 5 short answer questions through Part 1: Chapter 6, The Air Fund.

Multiple Choice Questions

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

2. When inflation raised the value of assets but not stock prices, what was the result?
(a) Junk bonds became less useful in building wealth.
(b) It was cheaper to buy a company than to start out from scratch.
(c) People began selling their stocks to start new businesses.
(d) People stopped buying stocks and company values soared.

3. Why was Drexel Burnham's investment banking business diminished by 1975?
(a) The bigger firms were copying its business model.
(b) Bond prices had risen too high.
(c) It had nothing to sell.
(d) Most of the major customers had fled.

4. Where did Milken want to move his bond operation unit in 1978?
(a) Los Angeles
(b) Las Cruces
(c) Los Alamos
(d) Las Vegas

5. Why did Drexel Burnham Lambert agree to let Milken move his operation at a cost of millions of dollars?
(a) Milken was then major stock holder in the company.
(b) Milken was responsible for almost all of the firm's profits.
(c) Milken had some inside information he could use in L. A.
(d) Milken threatened to leave.

Short Answer Questions

1. What was it about Milken that impressed his clients?

2. By 1981, what was Drexel responsible for?

3. What was HITS?

4. What influenced Milken to become interested in low grade bond portfolios?

5. Why did the new Drexel Burnham company give Milken a $2 million position?

(see the answer key)

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