Investment Banking Interview Questions & Answers

Investment banking interviews are legendary for their intensity. Candidates face a gauntlet of technical finance questions, rapid-fire mental math, and probing behavioral assessments. This guide covers every category of investment banking interview questions you need to master.

Understanding the IB Interview Process

1. Networking & Information Sessions — Banks track who attends events.
2. Online Application & HireVue — Video screening with pre-recorded behavioral questions.
3. First Round — 30 minutes of technical and behavioral questions.
4. Superday (Final Round) — 3-5 back-to-back 30-minute interviews covering technicals, fit, market knowledge, and brainteasers.

Technical Questions: Valuation, DCF & Accounting

The Three Financial Statements

"If depreciation increases by $10, walk me through the impact on all three statements."

• Income Statement — Pre-tax income decreases by $10. At 25% tax rate, net income decreases by $7.50.
• Cash Flow Statement — Net income down $7.50, depreciation added back +$10. Net cash from operations increases by $2.50.
• Balance Sheet — Cash up $2.50. PP&E down $10. Retained earnings down $7.50. Balance sheet balances.

Valuation Methods Overview

Walk Me Through a DCF: The Perfect Answer

"A DCF values a company based on the present value of its future free cash flows. First, project unlevered free cash flows for 5-10 years: EBIT minus taxes plus depreciation minus capex minus changes in working capital. Second, calculate terminal value using the Gordon Growth Method or Exit Multiple Method. Third, discount everything back to present using WACC. The sum gives enterprise value. Subtract net debt and add cash for equity value. Divide by shares outstanding for implied share price."

Common DCF Follow-ups

• "What discount rate?" — WACC for unlevered DCF, cost of equity for levered DCF.
• "Terminal value growth rate?" — 2-3%, in line with long-term GDP. Never above economy growth rate.
• "Most sensitive assumption?" — Terminal value (60-80% of total EV). WACC and growth rate are the biggest levers.

M&A and LBO Questions

M&A: Accretion/Dilution

If acquirer's P/E is higher than target's P/E in an all-stock deal, it's accretive to EPS. If lower, dilutive.

LBO Basics

Three drivers of LBO returns: EBITDA growth, multiple expansion, and debt paydown.

"What makes a good LBO candidate?" — Stable cash flows, low capex, strong market position, operational improvement opportunities.

Behavioral Fit: Why Banking? Why This Firm?

"I'm drawn to investment banking for three reasons. First, I've genuinely enjoyed analytical work — in my valuation course, I built a DCF for Spotify that made me realize I want to do this professionally. Second, I thrive in high-intensity, team-oriented environments. Third, I want to be at the center of consequential decisions early in my career."

Prepare behavioral stories using the STAR method. Also prepare "tell me about yourself" with structure: past, present, future (why banking, why this firm).

Market Questions & Current Events

• Know the 10-year Treasury yield, S&P 500 level, Fed funds rate
• Have 1-2 prepared stock pitches: overview, thesis, valuation, risks
• Read WSJ, FT, or Bloomberg daily

Breaking into IB: Networking & Timeline

Master the technicals, refine your story, stay current on markets, and network with genuine intent. Our guides on the STAR method and salary negotiation will help with the soft-skill side.

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