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

Multiple Choice Questions

1. What commission did Drexel make on these funds?
(a) one percent
(b) three quarters of a percent
(c) five eighths of a percent
(d) seven eighths of a percent

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

3. What was HITS?
(a) a high yield mutual fund that Drexel formed
(b) a government investigation agency
(c) High Interest Tax Service
(d) Hard Investment Trade Secrets

4. What was Drexel's only real competition by the 1980s?
(a) Morgan Stanley
(b) Lehman Brothers
(c) Barnes and Noble
(d) Merrill Lynch

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

6. By 1986, who was the largest stockholder in Drexel Burnham Lambert?
(a) Grace Milken
(b) Michael Milken
(c) the Milken Family Trust
(d) Lowell Milken

7. Who made the acquisition in the American Natural Resources (ANR) case?
(a) Ted Turner and TNT
(b) Oscar Wyatt and Coastal Corporation
(c) Fred Joseph and Drexel
(d) J. P. Morgan and Chase Manhattan

8. What were Milken's results the first year in his new position at Drexel Burnham?
(a) Break even
(b) 100% profit
(c) 10% profit
(d) Fewer clients

9. What did the Milken brothers do probably without notifying Drexel?
(a) investment partnerships that were to be registered with Bear Stearns
(b) underwrite bond issues in excess for $1 trillion
(c) buy into a number of smaller investment firms
(d) set up their own investment banking business

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

11. Why did Milken take the bus from New Jersey to Wall Street?
(a) because he did not drive a car
(b) because he could not afford the train
(c) to avoid talking to Wall Street people
(d) because he liked the people on the bus

12. What was the purpose of Fred Joseph's meeting at the Barbizon Plaza in New York?
(a) pirating talent from some of the biggest firms on Wall Street
(b) gathering inside information to take back to Los Angeles
(c) consideration of all ideas, even the far-out and the flamboyant, instead of the conservative
(d) to undermine Milken and take over control of the Department

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

14. To troubled businesses, what was Drexel's unregistered exchange offer?
(a) trading under the table
(b) a way of using stocks or bonds to meet the interest obligations
(c) lowering their interest rates to businesses
(d) creating additional Chinese paper

15. Why did Ichan and Kingsley limit themselves to 4.9% of shares in companies?
(a) 4 and 9 were Carl Icahn's lucky numbers
(b) 4.9% was below the SEC reporting limit on 13d disclosure documents
(c) they wanted to keep a low profile in takeover bids
(d) that was all they could afford without getting financing

Short Answer Questions

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

2. Where did most of the money come from when Icahn actually acquired ACF, a railroad car leasing company?

3. Who informed the SEC that he was attempting to gain control of Triagle Acquisition Corporation?

4. By 1981, what was Drexel responsible for?

5. What did Joseph label his brainstorming information about LBOs?

(see the answer keys)

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