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

Multiple Choice Questions

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

2. What government regulation made it easier for multiple mergers in the 1980s?
(a) deregulation of banks
(b) gauranteed loans for mergers
(c) cuts in the minimum wage
(d) a relaxation of antitrust restrictions

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

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

5. Who moved to Los Angeles with Milken?
(a) most of his relatives
(b) most of his staff
(c) several Wall Street firms
(d) most of his friends

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

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

8. What is it called when a firm decides to commit its own capital toward a takeover?
(a) highway financing
(b) piggybacking
(c) bridge financing
(d) marginal financing

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

10. How did Milken and his wife travel to Los Angeles?
(a) by car
(b) by train
(c) by private jet
(d) by bus

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

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

13. What did the Milken Group do in 1983?
(a) began making large charitable contributions
(b) cancel the annual Preditors' Ball
(c) started buying up real estate in Los Angeles
(d) moved from Century City to a building at Wilshire Boulevard and Rodeo Drive

14. What did the Federal Home Loan Bank Board discover about what Spiegle at Columbia Savings and Loan was doing?
(a) financing his junk bond purchases with federally insured funds
(b) making fictitious home loans
(c) using Columbia Savings and Loan money to finance his own investments
(d) manipulating his competitors out of business

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

Short Answer Questions

1. Where did Milken and his wife buy a house?

2. Why was Drexel Burnham's investment banking business diminished by 1975?

3. What was Drexel's only real competition by the 1980s?

4. What did Milken and Joseph devise to keep business flowing during the recession?

5. How did the firm now have equity stakes in most of the companies that it financed?

(see the answer keys)

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