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

Multiple Choice Questions

1. What was the estate they bought?
(a) the Clark Gable-Carole Lombard estate
(b) the Jackie Coogan estate
(c) the Judy Garland estate
(d) the Pickford estate

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

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 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.

5. How did bondholders often operate in noncompliance with SEC rules?
(a) selling bonds before they were registered
(b) secrecy in the bond market
(c) overstating the values of bonds
(d) not declaring income from bond sales

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

7. Who was another player involved in the National Can takeover attempt?
(a) Gerald Guteman
(b) Lowell Milken
(c) Victor Posner
(d) Oscar Wyatt

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

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

10. Keeping New York office hours, at what time did they begin work in L. A.?
(a) 6:30 a.m.
(b) 10:00 a.m.
(c) 4:30 a.m.
(d) 7:00 a.m.

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

12. 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.

13. What was Fred Joseph's strategy for hiring employees for Drexel?
(a) getting recommendations from bigger firms
(b) overhiring to learn which are the ones to keep
(c) paying higher commissions than anyone else
(d) hiring from the smaller firms so that they saw it as a step up

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

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

Short Answer Questions

1. What was the advantage FIFI and other like funds offer?

2. Who was behind the success of both First Executive and Columbia Savings?

3. What was Ichan able to do after he got a seat on the board of Tappan?

4. With whom was the firm of Drexel Burnham Lambert identified by the late 1970s?

5. For whom did Milken do trading?

(see the answer keys)

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