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This test consists of 15 multiple choice questions and 5 short answer questions.

Multiple Choice Questions

1. To find more ways for their clients to make money, to what did Milken and Joseph turn their attention?
(a) mergers and acquisitions
(b) offshore banking
(c) financial planning
(d) entertainment properties

2. Why did Milken takeovers work?
(a) because Milken personally supervised the takeovers
(b) because of Milken's name associated with the takeover
(c) because of inside information
(d) because the raiders were backed by pools of capital

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

4. What was the advantage FIFI and other like funds offer?
(a) better availability
(b) more security than Treasury bonds
(c) a higher yield than Treasury bonds
(d) simplicity of buying

5. Why did the new Drexel Burnham company give Milken a $2 million position?
(a) Milken would be the token Jew.
(b) Milken ochestrated the merger of Drexel and Burnham.
(c) Milken was thinking of leaving.
(d) Milken hid evidence from the SEC.

6. What company was a proxy fight that Carl Ichan lost?
(a) Hammermill
(b) Tappan
(c) the Times, Inc.
(d) AB Electrolux

7. What influenced Milken to become interested in low grade bond portfolios?
(a) the Morgan report on bond yields
(b) an unexpected profit from his own low grade bonds
(c) the Hickman study, an analysis of bond yields
(d) a course he took at Wharton

8. What kind of business did Milken's Belvedere Securities do?
(a) traded new lamps for old in a manner of speaking
(b) traded business secrets learned in hostile takeovers
(c) traded the body of the bond separate from its coupons
(d) traded bonds anonymously for clients of Drexel

9. What was the result of Tax Law reform in 1981?
(a) Big corporations faced running out of money.
(b) The increase in cash flow put companies in a better position to service debt.
(c) Only very large companies could make mergers and accquistions.
(d) More and more companies were burdened with higher taxes.

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

11. What did Joseph label his brainstorming information about LBOs?
(a) the M&A files
(b) the X-Files
(c) Air Fund or the highly confident letter
(d) the CIA files

12. What do raiders look for in companies to take over?
(a) public good will, which continues after the takeover
(b) new research and development projects
(c) companies saddled with heavy debt
(d) cash flow, which is one of the most important items in LBOs

13. What was the Milken philosophy?
(a) to go after businesses that were sure to fail
(b) to go after startup businesses
(c) to go after businesses that were owner-managed
(d) to go after businesses listed on the NYSE

14. What was one thing Lowell Milken did for the company?
(a) make political contacts
(b) keep out unwanted visitors
(c) make the coffee
(d) find tax shelters for them

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

Short Answer Questions

1. What became the name of bonds that come into being during highly leveraged takeovers?

2. Where did Milken want to move his bond operation unit in 1978?

3. What two large companies did Drexel underwrite bond issues for in a ten-day period?

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

5. What did Milken refuse to have in the Drexel annual report?

(see the answer keys)

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