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

Multiple Choice Questions

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

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

3. For whom did Milken do trading?
(a) only for himself now because he was making so much money
(b) just for Drexel Burnham Lambert because of the volume of work
(c) only for family and friends to keep attention away from himself
(d) not only for customers, but also his own account and his group's account

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

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

6. How did Milken decide to help Peltz?
(a) by underwriting $100 million in junk bonds for Triangle
(b) by making him a partner in his bond business
(c) by loaning him $10 million from his personal fortune
(d) by advision him how to avoid bankruptcy

7. How much money and how fast did Drexel raise for the Phillips Petroleum proxy fight?
(a) a half billion in three days
(b) 2 billion in one month
(c) $1.5 billion in forty-eight hours
(d) $10 million in a week

8. Where did Milken and his wife buy a house?
(a) San Clemente
(b) Santa Monica
(c) Encino
(d) Beverley Hills

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

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

11. What is a proxy fight?
(a) stockholder meetings where some are locked out
(b) two blondes fighting
(c) stockholder meetings where the management team is voted out
(d) having someone else fight a duel for you

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

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

14. 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) People began selling their stocks to start new businesses.
(c) Junk bonds became less useful in building wealth.
(d) It was cheaper to buy a company than to start out from scratch.

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

Short Answer Questions

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

2. Who was another player involved in the National Can takeover attempt?

3. What was Milken's biggest contribution to Drexel in the early years?

4. What was the result of Tax Law reform in 1981?

5. Why did Milken takeovers work?

(see the answer keys)

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