Top Investment Banking Interview Questions with Expert Tips to Crack Your Interview
Table of Contents
- Jaro Education
- 8, July 2025
- 5:00 pm
Investment Banking (IB) is often described as a dynamic and rewarding field where professionals play a crucial role in financial markets. In order to secure a position in this competitive industry, a rigorous interview process is involved, in which candidates are evaluated on the basis of their technical knowledge, analytical skills and industry insight. Therefore, it is essential to be well-prepared for a range of investment banking interview questions to excel in the interview process. This guide will cover investment banking questions and answers, along with expert tips that will help candidates improve their technical knowledge and communication skills.
What is Investment Banking?
Investment banking is a type of field that provides a range of financial services for capital raising, mergers and acquisitions (M&A) and advisory services to governments, corporations and financial institutions. Investment banks serve as mediators, helping corporations connect with investors and enabling the flow of capital in the financial markets through various methods, such as issuing stocks (equity) or bonds (debt).
Now that you understand investment banking, let’s move on to the top investment banking interview questions.
25 Top Investment Banking Interview Questions
*wallstreetmojo.com
Whether you are looking for technical investment banking questions or behavioural prompts, developing a competitive edge should be your key goal. So, let’s explore the top investment banking interview questions and answers.
Introductory Investment Banking Interview Questions and Answers
1. Walk me through your resume.
You should prepare a concise, compelling objective to highlight your educational background, any relevant experience and your interest in investment banking. Well, don’t forget to mention your achievements and skills that are suitable for this role.
2. Why have you chosen investment banking as a career?
Prepare your answer more impactful by sharing your passion about investment banking. For instance, “Choosing investment banking is a great opportunity, as it is the fastest way to learn financial modelling and to understand large, complex business transactions. Although it operates in a strict hierarchy and notoriously long hours, it is the most exciting career opportunity to gain in-depth knowledge of business across various sectors, valuable skills, be exposed to high-profile transactions and become an expert at the earliest stage.”
3. What do you know about our company?
To effectively answer the question, you must research the company thoroughly, including its strengths, alignment, recent achievements and specific areas of expertise that align with your career goals. Demonstrate a genuine understanding of the company’s culture and values and how your skills and experience are connected to their specific goals.
4. What are your career goals?
The effective way to answer this question is to focus on demonstrating an in-depth understanding of the industry, your long-term goals, and how your skills connect with the role and company. Highlight areas like developing a client network, becoming an expert in the financial sector, or pursuing leadership positions within the company.
Common Investment Banking Interview Questions
5. Tell me about the three financial statements.
The three common financial statements include the income statement, the balance sheet and the statement of cash flows. These financial statements provide a complete picture of a company’s financial performance and position.
Income Statement: The income statement illustrates the profitability of a company over a certain time.
Balance Sheet: The balance sheet provides a snapshot of a company’s assets, liabilities and shareholders’ equity at a specific time, like the end of a quarter or year.
Cash Flow Statement: The cash flow statement tracks the movement of cash in and out of the company during a specific period, providing a comprehensive picture of how a company generates and uses its cash resources.
6. How would you value a company?
Commonly, there are three main methods to value a company: Discounted Cash Flow (DCF) analysis, Comparable Company analysis (Comps) and Precedent Transaction analysis.
Discounted Cash Flow (DCF) Analysis: DCF analysis is a method that forecasts a company’s future free cash flows and discounts them to their present value using a discount rate.
Comparable Company Analysis (Comps): Comps involve recognising a group of companies that are similar to the target company in terms of industry, size, and growth rate.
Precedent Transaction Analysis: Precedent transaction is a method that focuses on analysing the past M&A transactions involving companies in the same industry or sector to estimate the value for a target company.
7. What is the difference between an investment bank and a commercial bank?
The key differences between an investment bank and a commercial bank include:
| Factors | Investment Bank | Commercial Bank |
|---|---|---|
| Definition | An investment bank helps businesses raise capital in the financial markets through activities like Initial Public Offerings (IPOs) and mergers and acquisitions (M&A). | A commercial bank focuses on providing everyday banking services to individuals and businesses, such as accepting deposits, providing loans and facilitating transactions. |
| Target Audience | Corporations, institutional investors and governments | Individuals, small businesses and large corporations |
| Risk Tolerance | Higher risk tolerance due to involvement in high-risk investments. | Lower risk tolerance due to the need to protect depositors. |
| Examples | J.P. Morgan Chase, Goldman Sachs, Morgan Stanley | Citigroup, Bank of America, Wells Fargo Bank |
8. Explain the key responsibilities of an investment banker.
An investment banker’s key responsibilities include:
- Advising companies and governments on raising capital
- Managing financial transactions
- Providing financial advice on transactions, including restructuring debt, guiding on strategic investments and managing capital projects.
- Helping with mergers and acquisitions
9. What is EBITDA?
EBITDA is a financial metric which stands for Earnings Before Interest, Taxes, Depreciation and Amortization. It measures a company’s financial performance by excluding non-operational expenses like interest, taxes, depreciation and amortization.
10. What is an IPO?
An IPO (Initial Public Offering) is when, for the first time, a private company offers its shares to the general public for purchase, changing it into a publicly traded company. This process helps the company to raise capital from investors, allowing anyone to become a shareholder.
11. What are your greatest strengths and weaknesses?
The most effective way to answer the question is to provide specific examples of your strengths and demonstrate self-awareness about your weaknesses. Plus, you can highlight the areas you are actively working on for improvement. This approach will help you show your positive qualities and a commitment to improvement, leaving a positive impression on the interviewer.
Technical Investment Banking Questions
*investmentbankingcouncil.org
12. What is the formula for enterprise value?
The formula for Enterprise Value (EV) is:
EV = Market Capitalisation + Total Debt + Minority Interest – Cash and Cash Equivalents
13. What is Beta and how to calculate it?
Beta is a measure of an asset’s volatility compared with the overall market. It helps investors understand how an asset’s price is expected to move in response to market changes and evaluate its risk level.
Beta is calculated by dividing the covariance between the asset’s returns and the market’s returns by the variance of the market’s returns.
Formula:
Beta (β) = Covariance (Stock Returns, Market Returns) / Variance (Market Returns)
14. What is CAPM and its formula?
CAPM (Capital Asset Pricing Model) is a financial model that demonstrates the relationship between an investment’s expected return and its systematic risk.
The formula for CAPM is:
Expected Return (Ra) = Risk-Free Rate (Rrf) + Beta (Ba) * [Market Return (Rm) – Risk-Free Rate (Rrf)]
Where:
Ra: Expected return on an asset
Rrf: Risk-free rate of return
Ba: Beta of the asset
Rm: Expected return of the market
15. Explain the Dividend Discount Model.
The Dividend Discount Model (DDM) is a financial valuation method that estimates an asset’s intrinsic value based on its expected future dividend payments. It claims that the worth of an asset is the present value of all future dividends.
16. Explain the Discounted Cash Flow (DCF) model.
The Discounted Cash Flow (DCF) model is a financial method which is used to estimate an investment’s present value by discounting its expected future cash flows.
17. What are the different types of investment banking transactions?
Investment banking assists companies and governments with complex financial transactions. The key transaction services include underwriting new debt and equity securities, facilitating mergers and acquisitions and providing financial advisory strategies.
18. What is the difference between a market order and a limit order?
The following are the key differences between a market order and a limit order:
| Features | Market Order | Limit Order |
|---|---|---|
| Definition | A market order directs your broker to buy or sell a stock at the current market price | A limit order allows you to specify the maximum price you want to buy at or the minimum price you want to sell at. |
| Execution | It is executed immediately at the best available price. | It is executed only when the market price reaches the specified limit price or better. |
| Speed | Fast | May be slower |
| Price Control | No price control with a market order; it is executed at the current market price. | You specify the time |
| When to Use | When you need immediate execution, and price is not your major concern. | When you want price control, and you want to wait for the desired price. |
19. What is the difference between the cost of debt and the cost of equity?
The primary differences between the cost of debt and the cost of equity are as follows:
| Features | Cost of Debt | Cost of Equity |
|---|---|---|
| Nature | The cost of debt is a liability that the company must repay its borrowed funds at an interest rate. | The cost of equity represents the return an investor expects on their investment in the company’s assets. |
| Calculation | The cost of debt is calculated by determining the effective interest rate paid on all debts, adjusted for tax deductibility. | The cost of equity is calculated using the Dividend Discount Model (DDM) or the Capital Asset Pricing Model (CAPM), where DDM focuses on dividend payments and growth, while CAPM considers risk and market returns. |
| Tax Treatment | Interest payments on debt are tax-deductible. | For equity investors, dividends and capital gains are not tax-deductible. |
| Risk | Debt is generally less risky because it involves a fixed repayment schedule and interest payments. | Equity has a higher level of risk because the investors are not guaranteed a fixed return and may lose their investment if the company's performance is poor. |
20. Can you discuss a recent deal that caught your interest?
This question tests your knowledge and understanding of how a deal works. To answer this question, you should focus on any recent deal that has made headlines and that you find interesting. Do some research about the deal and discuss how it impacts the industry involved.
Investment Banking Interview Questions for Freshers
21. What is a revenue bond?
A revenue bond is a type of municipal bond that is secured by the revenue generated from a specific project or facility. Issued by the state or local governments, these bonds fund public projects, such as toll roads, airports, stadiums and utilities, and are paid with the income generated from the projects.
22. What is a pitch book?
A pitch book is a marketing document used by investment banks and other firms to secure deals with potential clients and pitch their services.
23. What are the main functions of an investment bank?
The main functions of an investment bank include:
- Capital Raising
- Underwriting
- Mergers and Acquisitions
- Financial Advisory
- Sales and Trading
- Research
- Risk Management
24. What is the Weighted Average Cost of Capital (WACC)?
WACC stands for Weighted Average Cost of Capital, which is a financial metric that signifies a company’s average rate of return expected to be paid on its financing from all sources, such as debt and equity.
25. What is the role of an investment banker in a corporate restructuring?
Investment bankers are essential in corporate restructuring, acting as advisors and deal facilitators. They help companies navigate through financially difficult times. Plus, they provide knowledge in areas like determining valuation, structuring deals, managing debt and identifying potential buyers or partners. They also work closely with creditors to create a Plan of Reorganisation (POR) that assists the company in developing through financial restructuring.
Expert Tips to Crack Investment Banking Interview
*postaresume.co.in
Here are some expert tips that will help you crack the investment banking interview.
- You should prepare a couple of recent deals to discuss in depth. Give your opinion on its movement, whether it’s good or bad.
- Stay updated with the recent market trends, financial news and current situation of the economy.
- Investment banking interview questions include three general types of questions – behavioural, business sense and technical. While preparing for each type of question is essential, technical questions may require much time for preparation to get the right concepts.
- For technical investment banking questions, prepare with the real financial statements. Focus on understanding how the statements work and connect, practising key valuation methods and being familiar with industry-specific metrics.
- It’s crucial to validate your resume thoroughly, as interviewers often ask questions like ‘walk me through your resume’ or ‘tell me about yourself’ at the beginning of the interview to get to know the candidate.
- Make eye contact with your interviewer as you speak, helping you develop a connection with them.
- Neglecting to ask questions during an interview can be considered a red flag for some interviewers. Focus on asking insightful questions about the company or the role and showing your analytical skills.
- Don’t forget to send a thank-you note. It’s a professional gesture that shows you are grateful and reinforces your interest in the role and company.
- Practice mock interviews, which will help you build your confidence, boost your communication skills and identify areas for improvement.
Final Words
This guide for investment banking interview questions offers a detailed and comprehensive understanding of the interview process. Understanding financial statements, corporate finance, and valuation methods helps you prepare for technical investment banking questions and behavioural prompts. Make sure you keep yourself updated with the market trends, which will add value to your knowledge.
However, if you want to seek further guidance that can help boost confidence and enhance relevant skills, then trust Jaro Education. It offers a wide range of online programmes for many leading institutes, including the Professional Certificate Programme in Investment Banking by IIM Kozhikode. This online programme in IB is designed to enhance an understanding of corporate finance, including corporate valuation, mergers & acquisitions and corporate restructuring.
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