ANSWERS: 10 Wall Street Interview Questions That Will Make You Feel Like A Fool

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Photo: YouTube/In Betweeners

Yesterday, just in time for interview season, we tried to stump you with 10 Wall Street Interview Questions That Will Make You Feel Like A Fool.Naturally, we didn’t give you the answers right away, we wanted you to take the time to scratch your head and figure them out.

Hopefully, you’re done by now. If not, we’re sorry, your time has run out. Better luck next time.

How would you fight a bear?

Answer: Climb on its back and grab it by the neck so its paws can't reach you.

Source: Investment banking analyst

Refresher: Here's the question about Baye's theorem...

One analyst gave us this question: (Answer on next slide >)

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,

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

Why?

Source: Investment management analyst

Answer: Baye's Theorem

And he gave us an equally long answer:

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.

Source: Investment management analyst

Sell me my blackberry

Answer: There's no correct answer to these sales pitches per se, but 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.

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?

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

Source: Investment banking 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.

Answer on next slide >

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

Refresher: 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.

Answer on next slide >

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 happens to bond duration as interest rates increase?

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

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

This is an example of a company valuation question.

Answer on next slide >

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

Now send the questions to the smartest person you know, see how they do.

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