Sales & Trading interview questions, as the investment banking department’s, can generally be grouped into the following 3 sections:
1) “Who”: Tell me about yourself, Walk me through your resume
2) “Why”: Fit and motivation questions. “Why investment banking”, “Why our bank”
3) “How”: Technical questions
But the “How” questions differ very much from the IBD’s, which includes:
a) Investment and technical questions
b) Market-based questions
Below is a list compiled by City Sail blog contributors, focusing on the a) Investment and technical questions, and b) Market-based questions parts of the technical questions, to help us prepare for Sales & Trading interviews as a reference. We are constantly updating and adding new questions into the list.
I. Investment and general technical questions:
1. I can pay you twice your money every two years, three times your money every three years or four times your money every four years. Which option do you choose and why?
2. I flip a coin. If it’s heads you pay me £100. What should I pay you to play this game? What about if I only have to get 1 heads in two tosses, what is the new price?
3. What is the smaller angle between the two hands of the clock when it’s five minutes past nine?What happens to pension liabilities when interest rates go up?
4. Explain the Black Scholes model
5. Given four number 7 and one number 1, make it equal to 100 using only + – * / and ()
6. What sector do you like?
7. What sector do you dislike?
8. How would you invest your £1m?
9. What would you buy and what would you short?
10. Pitch me a stock you are long?
11. Pitch me a stock you are short?
12. What stocks do you follow? What would make you buy that stock?
13. Why is the P/E a good indicator?
14. Tell me about the risk of corporate bonds
15. What is a Junk bond?
16. Tell me what an institutional investor is
17. How does compounding work?
18. How does the yield curve work?
19. What does it mean when it is upward sloping? (more for those in undergraduate business school programs)
20. What is a Credit Default Swap?
21. How does a bank hedge it?
22. What is the main difference between the credit default swap market and the futures marke
23. What is the relationship between interest rates and exchange rates?
24. What would happen to the price of a stock put option if the company increases its dividends? Is the delta going to increase or decrease?
25. Explain to me duration and convexity. What is the duration formula? How does it work?
26. What is spot? What is a forward rate?
27. What is the yield curve?
28. Explain the difference between the “Yield” and the “rate of return” on a bond
29. If interest rates drop 20 basis points, how much does a zero coupon 2yr bond’s price increase/decrease?
30. How do you value a company?
31. What ratios do you use when valuing a company?
32. When you look at a company’s financials, what do you look at first, second, third and why
33. What is CAPM? Why is it useful?
34. I buy a 7 year par bond paying 8% annual. What is the YTM? If I wait 1 year and sell it at a YTM of 7%, how much money do I have?
35. I have a 10 year 6% bond. What is the maximum price this bond could ever reach? Why? The 5 year interest rate is 5% and the 10 year rate is 7%. What is the 5 year forward rate?
36. Do you think the stock market is efficient?
37. How do you calculate VaR?
38. Have you heard of LTCM?
39. What is the difference between prepayment risk and default risk?
40. Is Capitalism an inflationary or deflationary system?
41. What’s the safest possible investment in today’s markets?
42. What role does the housing market play in the economy?
43. Name a fixed income product you would recommend I buy
44. What factors control currency exchange rates?
45. How can the government influence the economy?
46. How does inflation affect the bond market? The stock market?
47. What do you think about transaction tax?
48. When inflationary fear rises, what two forms of macroeconomic policy does the government have to try to slow the economy?
49. If 80% of Ford’s sales is in Europe, what would happen to company’s annual revenue if the exchange rate decline from 1.5 to 1
50. What’s the square root of 2000?
51. What is the sum of 1-40?
52. How are bond prices and yields related?
53. How do you price a bond?
54. How do you calculate implied forward rates?
55. How do you price an option?
56. What is a CDO? How does it work?
57. What happens to bond prices when interest rates rise? What happens to equity markets? What happens to currencies?
58. What is an inverted yield curve and how do you interpret it?
59. What is a carry trade? How does it work?
60. Have you ever invested money?
61. Which is greater: 17% of 34 or 34% of 17?
62. If [x data] was announced, which five trades would you make?
63. Do you think Apple is a good buy?
64. What could be the reasons for two companies operating in the same industry trading at different EBITDA multiples?
65. Why would a creditor elect to receive equity via a restructuring process as opposed to debt?
66. Explain quantitative easing to me
67. Talk to me about the shape of the yield curve
68. How do you value a mining company? What multiples are most appropriate?
69. Assume you’re an investor and you come across a family-owned business for sale. What are the first things you’d do or want to know in order to determine what you’re willing to pay for the business? How would you think about valuing the business?
70. Sell me this water bottle
71. I want to sell you a hot dog stand. How much are you willing to pay for it? Why?
72. Describe a macroeconomic trend you’re observing and an investment thesis grounded in this development
73. Tell me a joke
II. Market-based questions
74. What is the price of gold?
75. Where did S&P 500 / FTSE 100 close yesterday?
76. What is the 10 year Treasury Rate of xxx country?
77. What are the major asset classes?
78. What is the price of: yen, pound, dollar, euro, gold, crude oil, Fed Fund rate, the 30 yr t-bill rate etc.
79. Past assets performance of the past 1-2 years, including: gold, index, oil, interest rates, currency etc.
80. Past economy performance of the past 1-2 years, including: US, China, Europe, UK, Japan etc.
81. Forecast assets performance in the next 1-2 years, including: gold, index, oil, interest rates, currency etc.
82. Forecast economy performance in the next 1-2 years, including: US, China, Europe, UK, Japan etc.
83. How do you stay on top of the markets?
84. What is unique about the treasury market vs. the rest of the debt market?
85. Why do we care about housing stats?
86. What do you think about gold as an asset class?
87. Explain the last six months of the US/UK/EU finance industry
88. Please tell me about an interesting article that you’ve recently read
89. What is worst for the economy: Inflation or Deflation?
90. What would you do to solve the current financial problems / crisis?
91. What do you think the FED / ECB will do at the next meeting and why?
92. What did the FED / ECB do at the last meeting? Do you agree with the actions?
93. Where do you think interest rates are going? Does this always depend on the FED/ECB?
94. What do you think about regulatory actions in 2016? Bonus? Executive pay?
95. What do you think about China in 2016? Other EM markets?
96. What is libor? What is libor’s current level?
97. Draw me the US yield curve. Draw me the UK yield curve. Why is it inverted?
98. What do you think about the current credit markets?
99. What do you think is the next big investment opportunity in the markets that can offer spectacular returns?
100. Tell me about something you recently read in the news that you think will have a positive or negative implication for the U.K. or global equity markets
101. If you walk in tomorrow morning and the U.K. has defaulted, walk me through what’s happening in all the major markets (stocks, credit, rates, FX, etc.) and why?
Questions list compiled by City Sail blog contributors. All rights reserved.