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

Multiple Choice Questions

1. What was Milken's goal by the early 1970s?
(a) He wanted to move into high-yield bonds.
(b) He wanted to have his own firm.
(c) He wanted to own Drexel Burnham.
(d) He wanted low-yield bonds to be its own specialty.

2. Who informed the SEC that he was attempting to gain control of Triagle Acquisition Corporation?
(a) Mike Milken
(b) Gerald Guterman
(c) Oscar Wyatt
(d) Nelson Peltz

3. Why did Drexel want Carl Icahn as a client?
(a) He was a risk taker that would make money even if he failed.
(b) Most other firms wouldn't handle him and he would be willing to pay the price to the investors of junk bonds.
(c) Icahn had liquid capital in offshore banks.
(d) Icahn would not use junk bonds to finance his hostile takeovers.

4. When were the tax laws changed to minimize the benefits of stripping?
(a) In 1982
(b) In 1991
(c) In 1989
(d) In 1990

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

6. What was the result of changes in the investment banking industry in the 1970s?
(a) Firms became highly competitive and business moved around.
(b) Many new firms came into existence and were soon taken over.
(c) Business concentrated in New York and Los Angeles.
(d) Regulations now made it harder to trade in junk bonds.

7. Why did Drexel remain a privately-held company?
(a) It was too much of a temptation for a hostile takeover.
(b) They did not want outsiders to get in on their business.
(c) Milken could then retain his need for secrecy.
(d) Joseph refused to allow it to happen.

8. What is RICO?
(a) Mexican Stock Exchange
(b) The Bank of Brazil
(c) Racketeer Influenced Corrupt Organizations Act
(d) Reporting Interest In Company

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

10. Why did the stripped bonds result in large tax benefits?
(a) those sales did not have to be reported as income
(b) no law covered the stripped Treasury security
(c) stripping the securities left them worthless
(d) without the coupons the securities were untraceable

11. With whom was the firm of Drexel Burnham Lambert identified by the late 1970s?
(a) Fred Joseph
(b) Ronald Reagan
(c) Michael Milken
(d) Tubby Burnham

12. Where did most of the money come from when Icahn actually acquired ACF, a railroad car leasing company?
(a) Much of the purchase price came from the sale of some of the company's divisions.
(b) Ichan got the money from his uncle.
(c) Ichan sold all of his Milken junk bonds.
(d) Milken financed much of the price.

13. Eventually, what did First Federal and Columbia Savings become?
(a) enormous appendages of Milken
(b) regular commercial banks
(c) part of the Drexel company
(d) big players in the construction industry

14. 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

15. What was it about Milken that impressed his clients?
(a) his knowledge and memory for details about every bond there was.
(b) his willingness to bargain when he sold them junk bonds
(c) his inside information about the junk bond companies
(d) his connections with politicians and movie stars

Short Answer Questions

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

2. Why did Milken's people say they performed so well?

3. Who are two examples of Milken clients who became quite wealthy?

4. Where did Milken want to move his bond operation unit in 1978?

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

(see the answer keys)

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