Tue. May 30th, 2023

investment banking brain teasers

How to Solve Investment Banking Brain Teasers

During an investment banking interview, you may be asked some tricky questions. These are called brain teasers, and they are used to test your analytical skills.

Answering these questions correctly requires a lot of practice, but it is well worth it. So, if you want to learn how to ace these tough questions, get the Forage Investment Banking Skills Passport.

1. Identify the company

Brain teasers are questions that require the candidate to make logical and analytical decisions, which is a key part of interviewing. Moreover, they are a good way to assess problem-solving skills and creativity.

Several investment banks use brain teasers to assess a person’s problem-solving, critical thinking and analytical skills. These types of questions are typically given at the end of an interview, and it is important to prepare for them.

The first step to cracking a brain teaser is to clear your mind and relax. This will help you understand the question better and give you time to prepare for it. You should also try to avoid being nervous and stumbling over your words.

If you’re not sure how to answer a brainteaser, it’s usually a good idea to look at an example. You can find many examples online to help you get a clear picture of the question.

It’s always a good idea to try to answer the question in an interesting manner. For example, you can talk about a stock that you like and why you think it’s more attractive than its rivals. This will show the interviewer that you are genuine and interested in their business, which is a good way to impress them.

You should also mention a recent merger or acquisition that you’re interested in. This will demonstrate that you are serious about the company and that you can bring value to it.

Finally, you should explain why the company is a great place to work. This will demonstrate that you are motivated and tenacious, which is a quality that banks value. It will also allow you to sell your strengths, such as being a team player or having good technical skills.

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2. Identify the market

Unlike a typical job interview, an investment banking one tends to be a bit more relaxed and fun. That said, it’s still important to have a solid game plan before, during and after your interview. Fortunately, there are plenty of resources to help you do just that. To be successful in this competitive industry, you need to stay on top of the latest trends and innovations. For example, one of the best ways to learn about new and improved products is to subscribe to an industry newsletter or two. Moreover, you can get a sneak peak at some of the most exciting new ideas by attending relevant industry events and trade shows. A well thought out plan and the right approach will pay off big time.

3. Identify the industry

Investment banking is a segment of the financial services industry that helps companies, institutions and governments raise capital (underwriting) via Initial Public Offerings (IPOs) and execute transactions such as mergers and acquisitions (M&A). The main function of investment banks is to generate revenue by managing complex financial transactions.

The industry is made up of global banks that provide a wide range of products and services to clients across the globe. These include bulge bracket investment banks, like Goldman Sachs and Morgan Stanley, as well as middle-market investment banks, like Bank of America Merrill Lynch, Credit Suisse, and Deutsche Bank.

They also offer risk management and wealth management services. These services can be a big source of income, especially for bigger firms.

In addition to this, some of the major players in the industry also have a merchant banking division. This division provides funds for start-ups that have the potential for high returns on investment.

This is a crucial role, as it allows the bank to make money off the companies they help fund. It’s an area that requires a lot of work to develop the right strategies and connections.

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To stay ahead of the competition, banks have to be constantly developing new ways to generate revenue. One way is to rely on research teams that can safely forecast the future and predict investment opportunities.

Another way is to sell shares and bonds to investors, including high net-worth individuals and organisations such as pension funds. The money raised from these sales is used to finance projects that require a lot of upfront cash, such as a company’s expansion into a new market or region.

To avoid any conflicts of interest, investment banks are supposed to separate their trading division from their investment banking division. This is known as a ‘Chinese wall’, and it is an important feature of the industry.

4. Identify the competitor

While some candidates are nervous about the prospect of answering a complex question, a brain teaser can be a great way to test your lateral thinking and problem-solving skills. It’s also a good way to find out whether you can stand up to pressure. It’s a good idea to practice solving a variety of brain teasers before the big interview, especially if they are asked by different people.

As a general rule, the best answer to an investment banking question is one that showcases your knowledge of the industry and the firm you are applying for. This will help you impress the hiring manager and make your case for a job offer. This includes mentioning the most relevant acronyms and buzzwords, as well as making sure you understand what a typical day at the office looks like.

It’s a good idea to also consider the question’s context, as the answer may be more complicated than you expect. For example, the most important metric may be the market capitalisation of your favourite company, rather than the total stock market value. This could mean a bit of research on your part, but it’s likely to be worth it in the end.

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Finally, the most difficult question to answer is one that you will be asked during your interview. As with the rest of your application, it’s essential to prepare for this ahead of time. The most efficient way to do this is to read up on the topic in question, as well as researching the firm and its history. Then, prepare a few sample answers to jot down in your notes.

5. Identify the product

Investment banks and funds often use brain teasers in their interviews to evaluate problem-solving skills, creativity, logical reasoning and the ability to ask questions. They may also be used to assess the candidate’s technical knowledge, which is crucial for roles in financial engineering and accounting. These questions test whether the applicant understands a specific product or industry. For example, if you are applying to an IB role that deals with IPOs, then you’ll want to be familiar with the basics of investing in this market. In addition, you can prepare for questions related to the firm’s market position in this area.

Lastly, you’ll also have to address the question of why you want to join the bank. For this, you should prepare a one-pager that sells your strengths to the interviewer. This could be that you are sociable and team player, that you are very motivated to start working at the bank, or that you have a strong technical background.

Jeffrey Augers
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By Jeffrey Augers

Jeffrey Augers is a highly skilled and experienced financial analyst with over 12 years of experience in the finance industry. He has a proven track record of delivering exceptional financial insights and recommendations to clients, empowering them to make informed decisions and achieve their financial goals. Jeffrey holds a Bachelor's degree in Finance from the University of Michigan, and an MBA from the Wharton School of Business.