- 17 min read

Answer Tips: How to Ace an Investment Banking Interview

Q1- What's the first question you would ask a client when he wants to raise money from the market?

Suggested Answer: When a client wants to raise money from the market, a potential first questions an investment banker might ask is: "What is the purpose of the fundraising? What will the proceeds be used for?" This question is important because it helps the investment banker understand the client's needs and goals, and also gives them an idea of the type of securities that may be appropriate for the client to issue (e.g. debt or equity). Additionally, the investment banker can also know the exact amount of money to be raised and the time frame within which the funds are needed.

Q2- How do you forecast a stock price?

Suggested Answer: There are several methods for forecasting stock prices, including:

Technical analysis: This method involves analyzing past market data, such as price and volume, to identify patterns and make predictions about future price movements.
Fundamental analysis: This method involves analyzing a company's financial and economic fundamentals, such as earnings and revenue, to assess its overall health and make predictions about its future performance.
Statistical models: This method involves using statistical techniques, such as time series analysis and machine learning, to analyze historical data and make predictions about future price movements.
Sentiment analysis: This method involves analyzing news and social media mentions to gauge the overall sentiment about a particular stock and make predictions about its future performance.

It's important to note that stock prices are affected by a wide range of factors, and no single method is guaranteed to be accurate. It's also essential to use multiple methods to get a more accurate prediction.

Q3- Name a political event you're tracking. How do you expect this to impact the markets?

Suggested Answer: An example of a political event that could have a significant impact on the markets is a national election. The outcome of an election can affect a country's economic and fiscal policies, which in turn can impact the performance of various industries and sectors. For example, if a political party that is perceived as business-friendly wins an election, it may lead to an increase in investor confidence and a rise in stock prices. On the other hand, if a party that is perceived as anti-business wins, it may lead to a decrease in investor confidence and a decline in stock prices.

However, it's important to note that political events are just one of many factors that can affect the markets, and their impact can be difficult to predict.

Q4- You have a zero-coupon bond and a par bond That has a higher duration and you want to sell another investor. How will you do that?

Suggested Answer: When selling a zero-coupon bond and a par bond to another investor, there are several key factors that should be considered and communicated to the potential buyer:

Maturity: The maturity of the bond is an important factor to consider, as it determines when the bond will mature and the investor will receive their principal back. A zero-coupon bond has only one payment, at maturity, while a par bond has regular interest payments.
Creditworthiness: The creditworthiness of the issuer is an important factor to consider, as it affects the bond's risk of default. The bond rating of the issuer, as assigned by credit rating agencies such as Moody's or S&P, can provide valuable information about the bond's creditworthiness.
Yield: The yield of the bond is an important factor to consider, as it determines the bond's return. A zero-coupon bond has a lower yield than a par bond with the same maturity, because the investor does not receive any interest payments until maturity.
Duration: The duration of the bond is an important factor to consider, as it measures the bond's sensitivity to changes in interest rates. A bond with a higher duration is more sensitive to changes in interest rates than a bond with a lower duration. If the par bond has a higher duration, it might be a better fit for an investor looking for a longer-term investment.
Purpose of investment: The potential buyer should also be made aware of their purpose of investment, whether it's for income, capital gains or a combination of both.

It's important to be transparent and provide all relevant information to the potential buyer, so they can make an informed decision about whether the bond is a good fit for their investment objectives.

Q5- What do you think of Bitcoin?

Suggested Answer: Bitcoin is a digital currency that uses decentralized technology for secure payments and storing money. It operates independently of a central bank.

Bitcoin has gained significant attention and controversy as an alternative form of investment and a store of value. However, it's important to note that the value of Bitcoin can be highly volatile, and it's considered a speculative investment. The lack of regulation and government oversight also makes it a higher-risk investment.

Additionally, it's important to note that the transaction of bitcoin is not widely accepted yet, and its adoption is still in its early stages. The technology behind it, blockchain, is however gaining traction in various industries.

Q6- Estimate the value of the steel industry in Europe?

Suggested Answer: The EU steel industry is estimated to be worth €134.5 billion in terms of Gross Value Added, and €83 billion in terms of direct value added to Europe's economy. The European steel market is expected to reach US$99.4 billion in 2026, at a negative CAGR of 3.03%, for the duration spanning 2022-2026. Steel contributes about €83 billion in direct value added to Europe's economy. The market is highly concentrated to a few large players, as the importance of scale economies favors concentration to larger companies.

Q7- What does the operations division do?

Suggested Answer: The operations division is responsible for managing and coordinating the day-to-day activities of a business or organization. Its primary function is to ensure that the organization's resources are used effectively and efficiently to produce the goods or services that the organization offers.

Some of the specific responsibilities of the operations division can include:

Production planning and control: The operations division is responsible for planning, scheduling, and controlling the production of goods or delivery of services. This includes managing inventory, scheduling production runs, and monitoring production progress.
Supply Chain Management: The operations division is responsible for managing the flow of materials and goods from suppliers to the production process, and from the production process to the customers. This includes managing logistics, warehousing, and transportation.
Quality Control: The operations division is responsible for ensuring that the goods or services produced meet the required quality standards. This includes setting quality standards, monitoring production processes, and implementing quality control measures.
Cost Control: The operations division is responsible for controlling costs and improving efficiency in the production process. This includes identifying and implementing cost-saving measures, monitoring expenses, and analyzing production costs.
Continuous improvement: The operations division is responsible for continuously improving the production process, by implementing new technologies, streamlining processes, and identifying opportunities for improvement

It's important to note that the responsibilities of the operations division can vary depending on the size and nature of the organization.

Q8- Talk to me a bit about our 3rd quarter results related to the IT sector?

Suggested Answer: Meta reported strong financial results for the quarter ended September 30, 2022, with overall revenue of $27.71 billion, a decrease of 4% year-over-year and an increase of 2% year-over-year on a constant currency basis. Income from operations was $5.664 billion, a decrease of 46% year-over-year and an increase of 2% year-over-year on a constant currency basis

Q9- I can see you as an entrepreneur, but you want to work in banking. Why is that?

Suggested Answer: Working in banking is an attractive opportunity for me because it offers an array of advantages. Banking industry provides a secure and stable career option, with good potential for growth. The industry is also highly competitive, which means that I must continuously develop my skills to stay ahead of the competition. Additionally, banking provides a great platform to learn and understand the ways of the financial markets, and develop the necessary skills to become a successful investor. By working in banking, I can also gain valuable insight into the business world, which will be invaluable to me in my future endeavors as an entrepreneur.

Q10- What attracts you to a career in investment banking and why?

Q11- What kind of lifestyle do you expect in investment banking?

Suggested Answer: A career in investment banking can be demanding and challenging, and it often comes with a fast-paced and high-pressure work environment. This can lead to a lifestyle that can be characterized by:

Long working hours: Investment bankers often work long hours, including evenings and weekends. This is especially true during busy periods, such as when working on a large deal or transaction.
High stress level: Investment banking can be a high-stress job, with tight deadlines and high-stakes deals. This can lead to a high level of pressure and stress, which can be difficult to manage.
Limited free time: Due to the demanding nature of the job, investment bankers may have limited free time to pursue personal interests and hobbies.
High earning potential: Investment bankers often earn high salaries and bonuses, which can provide a comfortable lifestyle. However, this may come at the cost of work-life balance.
Travel: Investment bankers may have to travel frequently for business, especially if they are working on deals or transactions with international clients.

It's important to note that the lifestyle of an investment banker can vary depending on the specific role and the company they work for. Some investment banking roles may have a more manageable workload, while others may be more demanding.

It's also important to be aware that this is a demanding field and not everyone can adapt to it. It's important to have a clear understanding of the lifestyle before pursuing a career in investment banking.

Q12- Why have you chosen banking over consulting?

Q13-Do you know what you're letting yourself in for?

Suggested Answer: Absolutely. Investment Banking Interviews are quite demanding and require strong skills in finance, economics, and mathematics. The interviewer will likely ask questions about financial markets, investment strategies, and risk management. Additionally, the interviewer may ask about your experience with financial modeling, portfolio management, and working with customers. The key to success is to be well prepared and be able to show that you have the skills and knowledge required for the job.

Q14- What would you be doing if you are not in finance?

Suggested Answer: If I were not in finance, I would likely pursue a career in the field of technology. I am particularly interested in developing software solutions to improve the way we interact with technology. I believe that the combination of my financial background and technical expertise would make me an ideal candidate for a position in tech.

In addition to software development, I would also be interested in exploring the field of data analytics. I have a strong understanding of financial principles, and I think that taking my knowledge of finance and applying it to data analytics would be a great way to use my skills to help businesses make sound decisions.

Finally, I would also be interested in pursuing a career in finance consulting. My knowledge of the financial industry and my experience in investment banking make me an ideal candidate for consulting roles. I would be able to provide businesses with expert insights on the financial markets and help them make the right decisions for their long-term success.

Q15- Do you know about the investment banking lifestyle?

Suggested Answer: Yes, I do know a lot about the investment banking lifestyle. Investment banking involves advising and financing clients who want to buy, sell, or merge with other companies. It is a fast-paced and demanding job that requires knowledge of the financial markets, banking regulations and laws, and analytical skills.

The interview process for investment banking is highly competitive and intense. It usually involves a series of rounds, each designed to assess a candidate's knowledge, technical skills, and communication abilities. During the interview, questions may cover topics such as financial statement analysis, equity valuation, and financial modeling.

To prepare for the interview, candidates must review their knowledge of the industry and hone their technical skills. They should also become familiar with the company they are interviewing with, including its culture, and research the team they will be meeting with. Finally, practice answering potential questions and create mock presentations.

Investment banking is a rewarding career, but it requires dedication and hard work. By preparing for the interview and having a strong understanding of the industry, candidates have a greater chance of success.

Q16- What are some of the most significant deals our bank has completed in the last 12 months you can tell any 3 names which you're aware of?

Suggested Answer: You bank has completed a number of significant deals over the last 12 months, including the acquisition of ABC Corporation by XYZ Corporation, the initial public offering (IPO) of DEF Corporation, and the debt refinancing of GHI Corporation. Additionally, our bank was involved in the acquisition of JKL Corporation by MNO Corporation and the sale of PQR Corporation to STU Corporation.

Q17- What is Barclays current stock price?

Suggested Answer: Barclays' current stock price is 179.76, as of 24 January 2023. The stock has seen a 9.22 day range, with a high of 9.31 and a low of 5.89. The volume of shares traded on this day was 41,893,275.

Q18- What do you think the bank's biggest regulatory threats are at the moment?

Suggested Answer: The biggest regulatory threat for banks at the moment is the risk of non-compliance with various regulatory standards, such as the Basel III capital requirements and the Financial Services Authority's (FSA) conduct rules. Banks must comply with these standards to avoid fines and other penalties, and failure to do so may result in reputational damage and significant financial losses. Additionally, banks are required to comply with anti-money laundering and counter-terrorism financing regulations, and must take measures to ensure they are safeguarding customers' data and privacy. In a constantly changing regulatory landscape, banks must stay up to date with the latest regulations and ensure they are compliant, or risk facing financial and legal repercussions.

Q19- What do you see as the strengths and weaknesses of Investment Banking division of Jp Morgan?

Suggested Answer: Strengths of Investment Banking Division of JP Morgan

Strong reputation: JP Morgan has a strong reputation as one of the largest and most successful investment banks in the world. It has a long history of successful deals and relationships with large corporations, governments, and other financial institutions.
Access to capital: JP Morgan has access to a large pool of capital that can be used to finance deals, making it a competitive advantage in the market.
Global presence: JP Morgan has an extensive global presence and network, making it easier for the firm to facilitate deals and complete transactions across borders.
Comprehensive services: JP Morgan offers a comprehensive range of investment banking services, from M&A advisory to capital markets and debt financing.

Weaknesses of Investment Banking Division of JP Morgan

Cost structure: JP Morgan's cost structure is higher than many of its competitors, making it more costly to use its services.
Risk exposure: As one of the largest investment banks, JP Morgan is exposed to higher levels of risk.
Reliance on wholesale banking: JP Morgan is heavily reliant on its wholesale banking division, making it vulnerable to changes in the market.
Reputational damage: JP Morgan has experienced several reputational crises in recent years, which has damaged its reputation in the market.

Q20- What differentiates our firm, please explain to me?

Suggested Answer: Investment banking is an area of finance that deals with the management and allocation of capital funds and other resources for major corporations, governments, and similar entities. It is distinct from commercial banking, which deals with everyday banking activities and offers more general services such as checking accounts and loans.

Investment banks offer services such as capital raising and underwriting, mergers and acquisitions, private placements and other specialty services. Investment banks also provide guidance on financial issues and advise companies on the best strategies to pursue.

Some of the most important differences between investment banking and commercial banking are:

Investment banking focuses on corporate clients and provides services such as mergers and acquisitions, capital raising and underwriting, private placements and other specialty services.
Commercial banks offer services such as checking accounts, loans, and other general services to individual clients and small businesses.
Investment banks are often much larger than commercial banks, and have a more global presence, due to their corporate client focus.
Investment banks are subject to a higher level of regulation than commercial banks, as they often handle large amounts of capital and confidential information.

Overall, investment banking provides a more specialized and tailored set of services, while commercial banking offers more general services. Investment banking is often more complex and requires more expertise than commercial banking.

Q21- Who's our major competitor? How do we measure up? What are the risks and opportunities we face?

Suggested Answer: JP Morgan is a major player in the investment banking world, and their main competitors are Goldman Sachs, Citi, and Morgan Stanley. These companies compete in a variety of areas, such as market share, product offering, and customer service. In order to measure up to their competitors, JP Morgan must stay up to date with the latest trends in the industry and make sure that their products and services remain competitive. One of the main risks associated with investment banking is the potential for market volatility, which can make it difficult to predict the future. However, there are also opportunities for JP Morgan to capitalize on, such as tapping into new markets and providing innovative services. Understanding the risks and opportunities is key to making sound investment decisions.

Q22- Tell me everything you know about the IT sector business model, anything you can explain?

Suggested Answer: The IT sector business model generally involves providing technology-based products or services to customers. This can include hardware such as computers and servers, software such as operating systems and applications, and services such as consulting and technical support. Some common revenue streams in the IT sector include:

Product sales: This can include hardware and software, and may involve both one-time sales and ongoing licensing agreements.
Services: Many IT companies also offer a variety of services, such as consulting, implementation, and technical support. These services can be provided on a project basis, or as ongoing support agreements.
Cloud services: Cloud computing has become increasingly popular in recent years, and many IT companies now offer cloud-based products and services, such as Software as a Service (SaaS), Infrastructure as a Service (IaaS), and Platform as a Service (PaaS). These services are typically provided on a subscription basis.
Advertising: Some IT companies, particularly those that operate online, may generate revenue through advertising.
Data analysis: With data becoming more and more important companies are willing to pay for data analysis services, to use it to make better business decisions.

Many IT companies also rely heavily on partnerships and collaborations to bring their products and services to market. These can include partnerships with other technology companies, as well as with companies in other industries that can benefit from the use of technology.

Overall, the IT sector is a constantly evolving and diverse field, with many different types of products, services and revenue streams.

Q23- Which area of our business is strongest?

Q24- Who's our CEO of JP Morgan?

Suggested Answer: Jamie Dimon is the Chairman and Chief Executive Officer of JP Morgan Chase.

Q25- What's the most important thing affecting this bank now and why?

Suggested Answer: The most important issue affecting JP Morgan Chase right now is the ongoing coronavirus pandemic. The pandemic has had a drastic effect on the global economy, and JP Morgan is no exception. The company has seen a significant decline in profits, as well as an increase in bad loans and defaults. This has caused the bank to take extraordinary measures, such as temporarily suspending dividend payments, cutting staff, and reducing capital expenditures. Furthermore, there is also the potential for more regulation and oversight, which could further impact the company's operations. The long-term implications of the pandemic are still unknown, and JP Morgan will have to find ways to navigate this uncertain environment.

Q27- What do you think this position requires, and how well do you match those requirements, did you think you are fit for this position?

Strong analytical skills: Investment bankers need to be able to quickly analyze large amounts of financial data and make informed decisions based on that data. This requires a strong background in finance and economics, as well as an ability to think critically and solve problems.
Strong communication skills: Investment bankers need to be able to effectively communicate with clients, colleagues, and other stakeholders. This includes the ability to clearly and persuasively present information and ideas, both verbally and in writing.
Strong networking skills: Investment bankers often need to build relationships with clients, potential clients, and other industry contacts. This requires a strong ability to network and build relationships with people from all different backgrounds.
Strong work ethic: Investment banking is a demanding field that often requires long hours and a high level of dedication. Individuals who are successful in this field typically have a strong work ethic and are willing to put in the time and effort to succeed.
Ability to work well under pressure: Investment bankers often need to make quick decisions and work under tight deadlines, so they need to be able to perform well under pressure.
Strong team player: Investment banking is a team-oriented field, and successful investment bankers often work well in a team setting and are able to collaborate effectively with others.
Knowledge of financial products and services : Investment bankers need to have a solid understanding of financial products and services, including stocks, bonds, derivatives, and other securities.
Strong business acumen: Investment bankers need to have a good understanding of how businesses operate and how to make decisions that will benefit the company.

Q28- What is the Dow Jones Industrial Average of today's opening bell?

Suggested Answer: The Dow Jones Industrial Average (DJIA) opened at 31,113.83 on the morning of January 28th, 2023. This is an increase of 0.67% since the previous trading day, and marks the fifth consecutive day of gains for the index. The Dow is currently up by 2.6% since the start of the year, and has seen an overall increase of 13.5% since the start of 2020. The index is composed of 30 blue-chip stocks, and is seen as a measure of the overall strength of the U.S. stock market.

Q29- What is the Bank of Fed funds rate as of this morning?

Suggested Answer: The effective federal funds rate (EFFR) as of this morning is 4.50%, as set by the Federal Reserve at their last meeting. The Fed Funds Rate is the target rate set by the Federal Reserve which affects the interest rates on loans between banks. It is used to control inflation and other interest rates. Raising the rate makes it more expensive to borrow, while lowering the rate has the opposite effect. The current Fed Funds Rate is at the upper end of the range of 4.25 to 4.5 percent, which was set in December 2020.

Q30- What's the difference between prop trading and market-making?

Suggested Answer: Prop trading, or proprietary trading, refers to the practice of using a firm's own capital to make trades, rather than trading on behalf of clients. This allows traders to take on more risk and potentially make larger profits, but also exposes the firm to greater risk. Market making, on the other hand, involves providing liquidity to the market by buying and selling securities. The market maker acts as a middleman, buying and selling securities from other traders at prices that ensure there is always a buyer and a seller available. Market makers make money from the spread between the bid and ask prices, and their main goal is to ensure that trading can take place smoothly and efficiently.