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This test consists of 5 multiple choice questions, 5 short answer questions, and 10 short essay questions.

Multiple Choice Questions

1. When he heard on the radio about a change in options to buy stocks, what did Milken do that saved Drexel Burnham Lambert?
(a) made calls from pay phones
(b) stopped in St. Louis and started buying
(c) turned around and went back
(d) cabeled DBL to warn them

2. What was the average net worth of members of Milken's core group after being with him five years?
(a) $5 million
(b) $12 million
(c) $20 million
(d) $10 million

3. 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) that was all they could afford without getting financing
(c) they wanted to keep a low profile in takeover bids
(d) 4.9% was below the SEC reporting limit on 13d disclosure documents

4. What is sometimes the result of an LBO?
(a) a company that has more assets than liabilities
(b) a need to acquire other companies to pay for the buyout
(c) a loss of company assets
(d) a corporation that is laden with debt

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

Short Answer Questions

1. What benefit did Milken arrange for his low grade investment group for the next 14 years?

2. How did bondholders often operate in noncompliance with SEC rules?

3. Why did the stripped bonds result in large tax benefits?

4. To find more ways for their clients to make money, to what did Milken and Joseph turn their attention?

5. What was the object of gaining control of a company and sell off many of its divisions?

Short Essay Questions

1. Explain the beginnings of blind pools arranged by Milken.

2. Describe Drexel's part in the National Can hostile takeover.

3. What was the subject of the meeting at the Barbizon Plaza in New York held by Fred Joseph?

4. How did Fred Joseph begin his goal of making Drexel a top notch firm in fifteen years?

5. Explain some of Drexel's problem clients in the early 1980s.

6. Tell something about Fred Joseph and how he became known at Drexel.

7. Tell something about Milken's first house in California.

8. How did Milken and Joseph create diversification for high-yield funds?

9. How did Drexel go about creating the Air Fund in an effort to get into M&A?

10. How did Milken begin building his fortune?

(see the answer keys)

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