The 2013-2014 investment banking and financial services graduate interview questions
Want a graduate job or internship in an investment bank? Wondering what kinds of questions you'll be asked apart from the standard ones that come up at every banking interview? We asked you to send us the questions you've been asked at banking interviews this year - and how you responded to them. We've listed them below.
(If you've attended an interview for a graduate or internship position at an investment bank, hedge fund or asset manager and want to share the questions you were asked with us, please email us at Editor@eFinancialCareers.com.)
1. Interview questions for an asset management summer internship at Man Group
Q: Can you estimate UK GDP?
Candidate's response: "I estimated the UK population at 60 million. I estimated the average age at which people start work as 20 and the average at which they finish as 60. I estimated the average life expectancy as 80 and that of the 60m population only 30 million are working citizens. I estimated the average salary as £40k and put UK GDP at £1.2 trillion."
Q: You've have estimated the average salary as £40k. Can you now estimate the largest mortgage an individual can obtain when buying a house. Let's say the interest rate is 5% on a 20 year mortgage.
Candidate's response: "I assumed that an individual looking to purchase a house is raising a young family and that of the £40k in salary only £10k will remain as disposable income after tax, expenses etc. This money will need to go to paying off the mortgage debt and towards paying off the interest on the loan each year.
Hence, we can write,
Where V is the value of the mortgage and n the number of years. I assumed that the largest payment will need to be made in the first year hence,
Solving this gives V=£100,000."
Q: Calculate the square root of 69
"We know 8^2=64 and 9^2=81 therefore the answer is in between the two. To find the sqrt(69) we can either use trial an error or use a more clever method.
Expanding this gives,
Neglecting small terms means we look for,
Where <= in this context means smaller than, but approximately equal to. It is clear that by substituting a value of x=0.3 into the above we obtain a value 4.8 which is smaller than but also approximately equal to 5. To double check we calculate,
Doing this and calculating all terms gives 68.89~69."
2. Interview questions for a private banking summer analyst position at Citi
Q: If you had to re-design an orange- what would it look like?
Q: Do you think China’s economy will continue to liberalise and by how much further?
Q: What is your favourite Microsoft programme and why?
3. Interview questions for an analyst trading position at Barclays Investment Bank
Q: How many footballs would fit into this room?
Candidate's answer: "I figured they just want to see how your brain works, so I tried to put together a logical solution (making it easy for myself to calculate). I assumed that the balls were square, and estimated out the square meterage of the room and calculated that. I then also mentioned that because the assumption used of it being square, I would be able to fit in approximately X more balls."
Q: Why did you choose to pursue a career in banking?
Candidate's answer: "I said that banking is an industry where I can make best use of my own strengths and skills to maximise my own achievements and potential. This combined with what I know of the industry, would ensure I not only achieved the most, but enjoyed the job the most."
Q: If you were advising a client, would you advise them to short or long shares in our company at the moment?
"I said I'd advise them to go long on the company and that despite the tainted past, it was on its way up and there was a lot of potential to make large gains."
4. Interview questions for a graduate interview for a junior actuarial position at AON Hewitt in Belgium
Q: Why do you want to work for us rather than one of our competitors?
Candidate's answer: "Because you are a lot more international than rivals."
Q: Where do you see yourself in 5 and 20 years?
Candidate's answer: "Within five years I expect to be in charge of juniors and in 20 years I expect to be in charge of a team."
Q: Did you know we have one of the better pension plans in Belgium?
Candidate's answer: "No, I didn't ! Can you please tell me more about it!"
5. Questions for the pre-screening interview for Berenberg's summer internship in research
Q: What did the FTSE close at yesterday?
Candidate's answer: "I was able to give the actual answer - fortunately I'd checked before the interview started."
Q: You've pitched me a buy stock and a sell stock, so what about a hold?
Candidate's answer: "Totally unprepared, I came up with something random: BP. Solid dividends, large enough to self-insure against catastrophes like the Deepwater Horizon accident."
Q: Explain why the Cypriot banking crisis is relevant to Russia
Candidate's answer: "I talked about the large Russian deposits locked up from Russia’s rich, potentially from money laundering or criminal activities."
6. Questions for the final round interview for Berenberg's summer internship in research
Q: You say that equities are overpriced and due to collapse soon. How can you say that when that’s my job and what I do for a living, day in day out? I’m telling clients to buy certain stocks, are you saying I’m wrong?
Candidate's answer: "I agree there are still good buys out there, especially for the longer term. But it’s my view that the loose money sloshing around in the system is inflating equity prices as investors seek attractive yields. As soon as the taps on QE are closed across the world, which will be some time in the next 1-2 years, we’ll see a sharp fall in prices. But that’s only the short term and something to keep an eye on, not a major crash."
Q: So you’ve never lived out for uni? How would you survive if I sent you to Hamburg for 2 years?
Candidate's answer: "Yes I’ve never lived out for uni, but I enjoy seeing the world. I’ve travelled abroad regularly every year and enjoy the sights and offering of different cities across the world. As for the cooking and laundry, I guess it’s just one of those things I’ll have to get used to. The job and change of scenery would motivate me more than enough."
Q: Which daily newspaper do you read? Aside from the FT or WSJ. And why?
Candidate's answer: "The Guardian. They have a nice phone app to read on the tube. The run through commentary of business news and announcements is particularly helpful - they analyse how announcements are likely to impact markets."
7. Interview questions for a summer analyst position in IBD at Bank of America
Q: If I buy new property plant and equipment (PP&E) for $10m ($5m cash and $5m debt), what will happen to the balance sheet and cash flow?
Candidate's answer: "CapEx will increase (depending on where you show CapEx, I said it would affect the Income Statement). Interest on debt will also increase and lower net income on income statement. You can also factor in depreciation and that will also lower the net income on the income statement. This reduced net income goes to the cash flow statement.
On the balance sheet, the non-current assets will go up by $10m but cash will be reduced in current assets by $5m and non current liabilities will go up by $5m balancing the balance sheet.
On cash flow statement, cash from investing will go down due to a use of cash to buy PP&E. Cash from financing will go up due to debt. Depreciation will be added back to cash flow from operations."
Q: Who will pay more for an acquisition, a strategic buyer or financial, and why?
Candidate's answer: "Strategic buyers will pay more due the supposed synergies from the deal. To acquire these synergies, one has to pay a control premium, that is a price above the market price of the company being acquired."
Q: Why would two companies in the same sector have different P/E ratios (one is lower, other is higher)?
Candidate's answer: "One company could be in the start-up phase and so might have little in the way of earnings but could be highly priced due to the future cash flow from the company. The other company could be a mature company. Therefore, there wouldn't be any room for growth and further profitability in the future."
8. Interview questions for a summer internship in sales and trading at JPMorgan
Q: Give an example of a time you encountered a difficult question whilst working in a group
Candidate's answer: "I worked in a bunch of small groups during my spring year internship. Each student had a really busy schedule, and I took the initiative to help re-prioritise everyone’s schedules and found areas where we could compromise. This helped to balance workload and work quality for the group.
In the same situation, there was a person in the group who was not doing his work. I helped to solve the problem by helping him to discover his strength and letting him focus on his strengths while the others helped to fill the gap."
Q: What is the biggest risk you have ever taken in your life?
Candidate's answer: "I am conservative and risk-averse by nature. That does not mean I do not take my chances. However, when I do take chances, I base them on a rational analysis so that I can ensure success to a certain degree, and fully understand the risks involved before 'taking the plunge.'"
Q: What do you see yourself contributing to this organization, in both the short and long term?
Candidate's answer: "In the short term I see myself contributing my energy, enthusiasm, hard work and willingness to learn. In the long term, if the opportunity arises, I would continue working with J.P. Morgan and contributing to its growth and success."