Preview Questions Investment Banker | Role Specific Skill

Question 1: Which of the following financial metrics is commonly used in creating a financial model for a bank or financial institution?

Which action should you take?

Choose only one option

Price-to-earnings (P/E) ratio

Price-to-sales (P/S) ratio

Net interest margin (NIM)

Return on invested capital (ROIC)

Question 2: What is the impact of duration mismatch between assets and liabilities on the interest rate risk of a financial institution?

Which action should you take?

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No significant impact, as long as interest rate sensitivity is balanced

Reduced interest rate sensitivity due to closely matching duration of assets and liabilities

Greater predictability of returns, with less variability in interest rate movements

Increased exposure to interest rate fluctuations, leading to potential losses or gains from asset-liability mismatches

Question 3: In client relationship management, how do you measure the success of your interactions with clients?

Which action should you take?

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Through the frequency of client calls and emails

By the number of meetings held with the client

By the amount of new business generated per interaction

Through client satisfaction surveys and portfolio performance reviews

Question 4: In market research, how would you assess the potential risks associated with a new investment in a rapidly growing market?

Which action should you take?

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By evaluating the creditworthiness of potential market participants

By conducting a historical performance review of similar investments

By using financial models to predict future cash flows and profitability

By analyzing political, economic, and regulatory risks in the market

Question 5: What is the most accurate way to model a buy-side deal in an M&A transaction?

Which action should you take?

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Use a pro forma combined income statement and balance sheet to project the combined company's financials

Calculate the target's synergies, then adjust the acquirer's cash flow accordingly

Add the target company's assets to the acquirer's balance sheet, including goodwill

Adjust the acquirer's financing structure by factoring in debt issuance and equity dilution

Question 6: When performing market research on a potential M&A target in the BFSI sector, which of the following is most crucial to understand first?

Which action should you take?

Choose only one option

The regulatory framework and potential compliance risks associated with the acquisition

The brand value of the target company and its market reputation

The synergy potential and expected impact on the acquirer's financials

The competitive advantage and operational efficiencies of the target company