UBS, DCM, (internship)

Question:

Can you draw me a typical yield curve for a bond?

Answer

This was a technical question I, with my background, simply did not know the answer to. I communicated this but the interviewer said it was fine and that we would go through it together. He asked me to draw x and y axes, to label them appropriately, and then to guess what the curve might look like over the lifetime of a bond. I guessed correctly, but then he asked me why. The answer was that in the end it all has to do with demand and supply. In the UK, for example, you have quite a downward sloping yield curve (not typical) because of large demand for pension plans that pay off 30 years or so down the line. With a bond of course, this does not raise the yield but essentially lowers it as the more people willing to buy the bond are willing to receive a lower and lower coupon from the lender. This was confusing but we talked through it.

Question:

Who pays for the US deficit?

Answer

This was an intended oversimplistic question but it was simply designed to see if I had some overall macroeconomic knowledge. The answer I gave was equally simplistic: China. However, I then qualified the answer by what I knew about trade imbalances in theory and in practice, and the interviewer was impressed.

These questions were provided to us by a candidate claiming to have interviewed at the institution named above. We cannot guarantee that these were the actual questions asked.