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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. What was Ichan able to do after he got a seat on the board of Tappan?
(a) He prevented the company from being taken over.
(b) He maneuvered the sale of the company to AB Electrolux.
(c) He was able to raise the stock prices.
(d) He took over running the company.

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

3. How did the firm now have equity stakes in most of the companies that it financed?
(a) by buying stakes in many companies instead of financing them
(b) by swapping Chinese paper for stock in the companies
(c) by using the firm's capital to finance the companies
(d) by demanding larger stakes in the companies

4. By 1986, who was the largest stockholder in Drexel Burnham Lambert?
(a) Michael Milken
(b) the Milken Family Trust
(c) Grace Milken
(d) Lowell Milken

5. What company was a proxy fight that Carl Ichan lost?
(a) Hammermill
(b) the Times, Inc.
(c) AB Electrolux
(d) Tappan

Short Answer Questions

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

2. What is a proxy fight?

3. What two large companies did Drexel underwrite bond issues for in a ten-day period?

4. What is it called when a firm decides to commit its own capital toward a takeover?

5. When he heard on the radio about a change in options to buy stocks, what did Milken do that saved Drexel Burnham Lambert?

Short Essay Questions

1. Explain why Milken wanted to move his operation to Los Angeles.

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

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

4. How did Milken begin building his fortune?

5. Explain why Drexel did not become a publicly-traded company?

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

7. Why did Thomas Spiegel come under investigation by the FHLBB?

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

9. Explain Milken's relationship with his staff.

10. Write about the relationship between Milken and Steve Wynn of the gambling industry.

(see the answer keys)

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