Preview Questions Investment Banker | Role Specific Skill

Question 1: What is the primary purpose of conducting a stress test on an investment bank's portfolio during a financial crisis?

Which action should you take?

Choose only one option

To measure the return on equity (ROE) under potential economic downturns

To determine the profitability of the portfolio under both normal and stress conditions

To simulate extreme market conditions and assess the portfolio's ability to withstand large losses

To assess the liquidity position and how easily the bank can meet its obligations

Question 2: What is the significance of "free cash flow" in valuation models?

Which action should you take?

Choose only one option

It is the cash available to stakeholders

It determines the company's tax liability

It indicates the company's profitability

It represents the cash left after debt payments

Question 3: What is the main purpose of using a convertible bond in deal structuring for a growing company?

Which action should you take?

Choose only one option

To attract investors by offering potential upside through conversion into equity at a future date

To reduce the company's equity dilution by offering bondholders a fixed income

To decrease the cost of debt by attaching lower interest rates in exchange for the conversion option

To hedge against market risk by securing both equity and debt components in the capital structure

Question 4: In a debt restructuring deal, what is the main goal of the debt-to-equity conversion?

Which action should you take?

Choose only one option

To increase the credit rating of the company for future borrowings

To reduce the company's debt burden by converting it into ownership equity

To shorten the maturity of the debt obligations

To provide additional collateral to secure the debt

Question 5: In a three-statement model, how are the balance sheet and income statement linked?

Which action should you take?

Choose only one option

Through depreciation and changes in working capital

By linking revenues to equity

Through the net income being added to equity

By netting debt and equity on the asset side

Question 6: What is a critical aspect of market research when assessing foreign market entry strategies for an investment bank?

Which action should you take?

Choose only one option

Understanding the local regulatory environment and market dynamics

Analyzing the historical stock market performance of companies in that region

Estimating future inflation rates and currency exchange fluctuations

Reviewing trade agreements and international investment treaties