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

Multiple Choice Questions

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

2. Why did Posner back out of the National Can deal?
(a) Drexel worked against him.
(b) He was diagnosed with cancer.
(c) He decided on another acquisition.
(d) One of his companies went bankrupt.

3. Where was much of the money coming from for takeovers in the 1980s?
(a) big blind pools that Milken would raise for his customers
(b) fake junk bonds imitating Milken's bonds
(c) foreign investors with extra capital
(d) the break up and sale of raided company divisions

4. What was the result of changes in the investment banking industry in the 1970s?
(a) Regulations now made it harder to trade in junk bonds.
(b) Many new firms came into existence and were soon taken over.
(c) Firms became highly competitive and business moved around.
(d) Business concentrated in New York and Los Angeles.

5. Who informed the SEC that he was attempting to gain control of Triagle Acquisition Corporation?
(a) Gerald Guterman
(b) Nelson Peltz
(c) Mike Milken
(d) Oscar Wyatt

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

7. What is it called when someone holds a financial advantage over a company to force a sale?
(a) hijacking
(b) greenmail
(c) investment banking
(d) proxy fighting

8. How did Milken break into the Las Vegas gambling business community?
(a) Milken traveled every weekend to gamble in Las Vegas.
(b) Milken showed the casino owners how they could double their income.
(c) Milken lowered his commissions to get large casino business.
(d) Milken helped Steve Wynn raise the funds he needed to build in Atlantic City.

9. What did Carl Ichan become known as?
(a) a movie mogul
(b) losing proxy fights
(c) going bankrupt
(d) a takeover specialist, especially hostile takeovers

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

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

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

13. Eventually, what did First Federal and Columbia Savings become?
(a) regular commercial banks
(b) part of the Drexel company
(c) big players in the construction industry
(d) enormous appendages of Milken

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

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

Short Answer Questions

1. How did Milken and his wife travel to Los Angeles?

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

3. What was Milken's goal by the early 1970s?

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

5. Who becomes Milken's ally and public face in 1974?

(see the answer keys)

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