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

Multiple Choice Questions

1. What was a major factor in the failure of Beverly Hills Savings?
(a) rumors that Milken was taking it over
(b) too many hostile takeover attempts
(c) large withdrawals by depositors
(d) huge losses in junk purchased from Drexel

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

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

4. What was a cause of the market crash of 1974?
(a) stock prices soaring
(b) low prices and a lot of bargains among companies
(c) a slow down of foreign business
(d) economic inflation in Asia

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

6. Why did Drexel Burnham Lambert agree to let Milken move his operation at a cost of millions of dollars?
(a) Milken was responsible for almost all of the firm's profits.
(b) Milken had some inside information he could use in L. A.
(c) Milken was then major stock holder in the company.
(d) Milken threatened to leave.

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

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

9. What do raiders look for in companies to take over?
(a) cash flow, which is one of the most important items in LBOs
(b) new research and development projects
(c) public good will, which continues after the takeover
(d) companies saddled with heavy debt

10. 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

11. 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.

12. What did Joseph label his brainstorming information about LBOs?
(a) the M&A files
(b) the X-Files
(c) Air Fund or the highly confident letter
(d) the CIA files

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

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

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

Short Answer Questions

1. What kind of business did Milken's Belvedere Securities do?

2. Why did Milken takeovers work?

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

4. What was Milken's goal by the early 1970s?

5. What became the name of bonds that come into being during highly leveraged takeovers?

(see the answer keys)

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