IT'S WALL STREET INTERVIEW SEASON: Here Are 10 Questions That Will Melt Your Brain

Photo: bpsusf via flickr

As of Friday, interns are either leaving Wall Street, or finding out they have their dream offer.If you’re in the former camp – you didn’t get an offer — it’s OK. There’s still hope. Step away from the ledge.

You can still head to interviews and find a place for yourself, but you need to be prepared. That’s why we put together these Wall Street interview questions for you.

We surveyed some current analysts about the classic and ridiculous questions they were asked when applying to the Wall Street internship that got them to their current position.

Don’t take the standard questions for granted. Something as simple as, “what is investment banking?” can back you into a corner if you don’t stay cool and confident. (Note: if you get that one, explain i-banking is a service that provides advice to clients on capital raising and M&A).

As for the ridiculous questions — just get ready for anything. We’ll keep sending them out to you as we find them.

How would you fight a bear?

This is an example of an absurd situational questions, here's your shot to be a problem solver.

Source: Investment banking analyst

Baye's theorem, see below...

One asset management analyst gives us this question:

1) We are playing Russian roulette, with a standard 6-chamber revolver. I put two bullets in adjacent chambers, spin, point the gun at my head, and pull the trigger. Click. I'm still alive. It's now your turn, and I hand the gun to you, and give you two choices.

Would you rather, assuming you want to live,

b) Do not spin, aim at your own head, and pull the trigger.

Why?

Source: Investment management analyst

The answer is actually b, despite the unintuitive answer for anybody who doesn't understand conditional probability. The key is that the bullets are placed in adjacent chambers. Because this is a relatively tractable problem, we can illustrate this with a stylised diagram. Suppose 'B' stands for a bullet and '_' stands for an empty chamber, these are the following possible configurations for the revolver (without loss of generality, assume that the first trigger pull comes from the first chamber):

B B _ _ _ _
_ B B _ _ _
_ _ B B _ _
_ _ _ B B _
_ _ _ _ B B
B _ _ _ _ B

Given that he didn't die, cases 1 and 6 are ruled out, so the remaining cases are 2 through 5. If we do not spin, the revolver advances to the next chamber, and case 2 is the only one where you would face certain death. Hence your survival rate is 75% if you choose not to spin.

If you choose to spin, you instantly reset the probability of dying back to 2/6, implying a survival rate of 66.67%. Choosing not to spin is clearly the smarter move.

If we extend this problem to n bullets across k chambers with different adjacency patterns, the problem becomes a lot harder and requires more detailed knowledge about combinatorics. This particular simplified version is not very difficult by itself, but it's a clever little puzzle that can quickly screen out over half of the applicants for a Sales and Trading internship if they do not understand basic probability/combinatorics.

Sell me my blackberry

This an example of a Pitch Question, it's your chance to show you're a good salesman

Source: S&T analyst

...the key thing in selling a product is creating need. Also remember that with these types of questions, demonstrating value through showing is much more meaningful than merely spelling it out. In this scenario, engage the interviewer's imagination by setting scenario where the phone would prove to be indispensable.

Source: S&T analyst

My bank wants to send me to Shanghai, but my wife refuses to move there. Pretend I'm my wife, sell the new position in Shanghai to me and convince me to move to China.

While this may seem random the analysts and interns told BI that they were often prepared for the standard questions by their career centres and mentors, so don't be afraid to ask for advice.

Source: S&T analyst

Answer: The other key thing with these pitch questions is to keep your cool and not get rattled.

This one requires a few more creative assumptions, but the bottom line is 'know your audience.'

Talk to the interviewer by trying to engage the point-of-view of his aforementioned wife, without getting too carried away with the mannerisms and expressions you use to convey your point. It's hard not to sell anyone on Shanghai honestly, and the interviewer just wants to make sure you think things through clearly, don't freeze up under pressure, and ultimately communicate your points effectively.

Source: S&T analyst

How would you kill a giraffe?

Sorry, PETA.

Source: Investment banking analyst

Answer: Jump on its back, climb up its neck, and your weight will snap its neck.

Source: Investment Banks analyst

There's a 10x10x10 cube made of 1,000 1x1x1 cubes if you get rid of the outer layer of cubes how many do you have left?

Remember, you're only getting rid of cubes on the outside layer.

Source: Former M&A analyst

Answer: Pretend the top layer of the cube has melted away, and you're left with...

An 8x8x8 cub of 512 cubes.

Source: Former M&A analyst

You have 2 buckets. One full of white marbles and the other full of black marbles. How do you allocate the marbles into buckets in a way that maximizes your probability of picking 2 white ones when you pick 1 marble from each bucket?

Logic questions are pretty standard.

Source: Former M&A analyst

Answer: Put one white marble in one bucket, put all the other marbles in another bucket.

Suddenly, your odds of picking a white marble have improved from 50-50 to 75-25.

Source: Former M&A analyst

What happened to the Giants last night?

One sales and trading intern tells us he was asked--out of the blue--the score of a football game the night before, despite never talking about sports during the course of the interview.

Advice: Watching SportsCenter has its benefits!

What happens to bond duration as interest rates increase?

One analyst gave us this as an example of a typical sales & trading internship question that most students should always know before walking into an interview.

Source: S&T analyst

Answer: Bond prices are more sensitive to changes in rates when rates are low versus when they are high.

That's because the bond pricing forumula exhibits convexity as a hyperbolic curve.

Source: S&T analyst

How do you value the hot dog stand at Union Square in New York City?

This is an example of a company valuation question.

Source: Former summer analyst at Morgan Stanley

Answer: Study up on the basics...

Think of the hot dog stand as a company--there are many ways to value firms. One option could be to look at the prices on recent deals. If there are no recent deals, try constructing a discounted cash flow model to observe cash flow and future growth. It is also key to think about and estimate how many sales a hot dog stand could do in Union Square per year, areas the stand could find growth (such as expanding into pretzel sales), the effective tax rate in New York City, margins, etc.

Source: Morgan Stanley summer analyst

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