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This quiz consists of 5 multiple choice and 5 short answer questions through Part 3: Chapter 14, Sovereign Privileges.

Multiple Choice Questions

1. How did Milken decide to help Peltz?
(a) by underwriting $100 million in junk bonds for Triangle
(b) by making him a partner in his bond business
(c) by advision him how to avoid bankruptcy
(d) by loaning him $10 million from his personal fortune

2. What advantage did Milken's kind of debt offer?
(a) It did not tie up cash the way loan repayments did.
(b) It was done under the table so the banks did not know about it.
(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.

3. What does FIFI stand for?
(a) Five Investment Features Initiative
(b) Field Investment File Information
(c) Fund Income from Favored Investors
(d) First Investors Fund for Income

4. What did Bergerac and his allies forget in the process of fighting the takeover?
(a) The large cash bids by Pereleman would benefit the shareholders.
(b) The company was failing during that time.
(c) That the courts could prevent them from offering a management contract.
(d) That Perelman had Minken behind him.

5. Why did Atlantic Capital have to stop selling Wedvick's contracts?
(a) Drexel bought them out.
(b) It became over-extended and faced bankruptcy.
(c) Pressure on Kansa came from Standard and Poor's and a downgrade to an A-rating.
(d) Wedvick's contracts became worthless.

Short Answer Questions

1. What was the Wall Street attitude toward low grade bonds at the time Milken started trading in them?

2. Why did Drexel remain a privately-held company?

3. What commission did Drexel make on these funds?

4. What was the result when many Drexel employees were not allowed into Milken's investment groups?

5. Why did Drexel have to separate from J. P. Morgan?

(see the answer key)

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