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This quiz consists of 5 multiple choice and 5 short answer questions through Part 3: Chapter 17, The Humbling.

Multiple Choice Questions

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

2. What could happen to Drexel with so much power vested in one man?
(a) possible collapse of the company
(b) possible take over of the company
(c) possible loss if anything happened to him
(d) possible abuse of power

3. What did Kansa and Clarendon both have that Wedvick needed?
(a) corrupt employees
(b) AA rating
(c) no supervision
(d) excess capital

4. Why did Drexel want Carl Icahn as a client?
(a) Icahn had liquid capital in offshore banks.
(b) Most other firms wouldn't handle him and he would be willing to pay the price to the investors of junk bonds.
(c) He was a risk taker that would make money even if he failed.
(d) Icahn would not use junk bonds to finance his hostile takeovers.

5. What was the subject of debate in the mid 1980s during the M&A onslaught?
(a) the economic advantages of takeovers
(b) the cash flow of takeovers
(c) the dangers of over growth
(d) the legality of hostile takeovers

Short Answer Questions

1. Why did people like Lawrence Coss of Green Tee Acceptance feel they were targets of hostile takeovers?

2. What was HITS?

3. What benefit did Milken arrange for his low grade investment group for the next 14 years?

4. Why was the partner Groupe Bruxelles Lambert S.A. not happy with Drexel and trying to take it over?

5. What are REITs?

(see the answer key)

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