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

Multiple Choice Questions

1. When did Drexel begin dealing based on insider information?
(a) When Milken hooked up with Carl Ichan.
(b) When they began backing OLTs.
(c) When Milken financed Ivan Boesky.
(d) When the Phillips Petroleum deal got underway.

2. How did Milken's unit function within the larger firm?
(a) as a front for other Drexel activities
(b) as the firm's banker
(c) as a separate firm within Drexel
(d) as an integrated member of the firm

3. Who was James Grant?
(a) the chief of the SEC
(b) the editor of Grant's Interest Rate Observer
(c) the author of the Grant Bill in Congress
(d) the head of Grant Investment Bank

4. What had been Perelman's greatest acquisition before Revlon?
(a) Cinemascope
(b) Technicolor
(c) Todd-a-o
(d) NBC

5. What often benefited Drexel in dealing with its clients?
(a) positive publicity
(b) equity from the deals they took part in
(c) inside information
(d) leads for new clients

6. What was one of the most important factors in the leveraged buyout deals?
(a) loopholes in the banking laws
(b) support of key Congressmen
(c) the zero coupon bond
(d) knowing Michael Milken

7. How did Drexel get around the law and continue the takeovers?
(a) by using offshore banks to finance their deals
(b) by creating dummy companies to made the acquisitions
(c) by using preferred stock instead of bonds as a means of financing
(d) by lobbying to get the rules overturned

8. What did Kansa and Clarendon both have that Wedvick needed?
(a) no supervision
(b) corrupt employees
(c) AA rating
(d) excess capital

9. What made Drexel's troubles even worse after Boesky Day?
(a) The firm was hated by many on Wall Street.
(b) The FBI wiretapped Milken's and Drexel's offices.
(c) Both New York and California started independent investigations.
(d) The firm defaulted on its building mortgage.

10. What did Drexel think about the Japanese acceptance of junk bonds used in takeovers?
(a) that the Japanese would accept anything made in America
(b) much faster there than it had been in the United States
(c) that they would need to do a lot of educating
(d) that it would be a foothold in all of Asia

11. Why was the partner Groupe Bruxelles Lambert S.A. not happy with Drexel and trying to take it over?
(a) the falling stock price of drexel
(b) the Drexel practice of not paying dividends
(c) Drexel's secret bookkeeping
(d) the Drexel continued support of Mike Milken

12. What happened to the blue-chip investors Drexel was trying to attack?
(a) They rallied in support of Drexel.
(b) They kept coming for Drexel help anyway.
(c) They did not stay with the firm.
(d) They took a wait and see stance.

13. What was the result when many Drexel employees were not allowed into Milken's investment groups?
(a) Milken made sure they did not know they were excluded.
(b) There was some degree of hostility.
(c) Many were relieved that they would not have to invest.
(d) Most people did not care.

14. What happened in April of 1987 while the investigation of Milken and Drexel was proceeding?
(a) Milken fled the country.
(b) The 1987 Predators' Ball was held.
(c) Milken tried to bribe an FBI undercover agent.
(d) The Predators' Ball was cancelled.

15. Why did the LTV situation not affect Drexel?
(a) Drexel used its own money to secure the LTV bonds.
(b) Drexel pointed out the way LTV misused junk bonds.
(c) Drexel engineered a second buyout of LTV.
(d) The thrifts that collapsed and the defaults that occurred were not among Milken's customers

Short Answer Questions

1. What did the Revlon takeover prove?

2. By the fall of 1989, what were many people doing?

3. Why did none of the thirty bills introduced covering takeovers in 1984-85 pass?

4. What was another company Wedvick used in his investment scheme?

5. Why was the Technicolor acquisition so successful?

(see the answer keys)

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