Financial Analysis interview preparation

Questions

100

Traced to a firm

42

Firms

28

Updated

September 2026

Asked at

All firmsMoody's7Bain Capital3SSState Street3AMAres Management2BLBlackRock2DED.E. Shaw2MSMorgan Stanley2Oaktree Capital Management2S&P Global2Bridgewater Associates1Citadel1FTFranklin Templeton1Golub Capital1HWHarris Williams1Houlihan Lokey1J.P. Morgan1Jane Street1MWMarshall Wace1Millennium Management1Morningstar1PIMCO1Sycamore Partners1TSTruist Securities1Two Sigma1Vanguard1WMWellington Management1Wells Fargo Securities1Wolverine Trading1

Topic

All topicsThree statements9Accounting policy and standards5Working capital and cash7Ratio analysis8Forecasting and budgeting9Variance and management reporting7Unit economics and costing8Capital budgeting7Cost of capital and valuation7Markets and rates5Modelling, Excel and data8Business partnering6Brainteasers and estimation4Fit and career10

Level

AnyCoreIntermediateHard

Type

AnyTechnicalCaseBrainteaserMarket viewFit

1. 064Given a portfolio of three bonds, explain how the portfolio changes if duration increases.Cost of capital and valuationHardtechnicalPIMCOGeneralist · Los Angeles · 2026

   Say this

   Higher duration means more price sensitivity to rates. Portfolio duration is the market-value-weighted average of the three bonds' durations, so if it rises, the same 100 basis point move now costs or earns you more, and the portfolio has become a bigger bet on the direction of rates.

   Then walk it

   1. The mechanics: the percentage price change is roughly minus modified duration times the yield change. Move portfolio duration from 4 to 7 and a 100 basis point rise takes you from about minus 4 percent to about minus 7.
   2. Portfolio duration is weighted by market value, not by face value or by count. So you can raise it by swapping the short bond for a longer one, by shifting weight toward the longest bond, or simply because yields fell and the long bond is now a larger share of the portfolio.
   3. Duration also rises mechanically when coupons are lower or yields fall, because more of the present value sits further out. That is why a portfolio's duration drifts even when you trade nothing.
   4. At higher duration, convexity matters more. The linear duration estimate understates the gain when yields fall and overstates the loss when they rise, and the error grows with the size of the move, so for anything beyond about 100 basis points I would use duration plus convexity.
   5. The risk statement I would give a treasurer: you have increased carry and increased interest rate risk together. If the curve steepens against you, the long bond does most of the damage, and a 20 crore portfolio at duration 7 loses roughly 1.4 crore on a 100 basis point rise.
   6. And the limitation: duration only captures a parallel shift. Three bonds at different maturities are exposed to the shape of the curve, so I would also look at key-rate durations rather than one number.

   Where candidates lose it

   Saying only 'the portfolio gets riskier'. Give the numeric sensitivity, say that portfolio duration is market-value weighted, and name convexity and the parallel-shift assumption. Those three points are what the question is screening for.

   Expect next

   • How would you reduce duration without selling the long bond?
   • What does convexity add?
   • What if the curve steepens rather than shifts in parallel?

   Reported by candidates at PIMCO (Generalist, Los Angeles, 2026). Source: Wall Street Oasis.

2. 066Terminal value: perpetuity growth or exit multiple? Which do you trust?Cost of capital and valuationHardtechnicalCorporate financeKPO research support

   Say this

   I compute both and use them as a check on each other. Perpetuity growth is theoretically cleaner because it is built from the same assumptions as the rest of the model; exit multiple is more intuitive but imports today's market sentiment into a value ten years out.

   Then walk it

   1. Gordon growth: final year free cash flow times one plus g, divided by WACC minus g. It is very sensitive to the spread between WACC and g. At a 12 percent WACC, moving g from 4 to 5 percent raises terminal value by about 14 percent.
   2. Exit multiple: apply a normalised EBITDA multiple to the final year. The problem is you are assuming what the market will pay a decade from now, and today's multiple reflects today's rates and today's mood.
   3. So the discipline is to run both and reconcile. Take the perpetuity terminal value and back out the implied EBITDA multiple. If a 4.5 percent growth rate implies 19 times EBITDA for a business that has always traded at 11, something is wrong upstream, usually an unrealistic terminal margin.
   4. The internal consistency check that most models fail: at steady state, growth requires reinvestment. Terminal growth of 6 percent with capex set equal to depreciation implies infinite returns on new capital. Either fund the growth with reinvestment or lower the growth.
   5. Also check that terminal-year return on capital is plausible. If the model assumes the company earns 30 percent ROIC forever, you are assuming competitive advantage with no decay, which almost never survives.
   6. My practical rule: perpetuity growth capped at long-run nominal GDP, cross-checked against the implied multiple, with a sensitivity table over WACC and growth. And I would say plainly that terminal value is where two-thirds of the answer lives, so it deserves more scrutiny than the year-three revenue assumption people spend their week on.

   Where candidates lose it

   Picking one and not cross-checking. The mark of a good answer is backing out the implied exit multiple from the perpetuity method, and noticing that terminal growth without reinvestment is internally inconsistent.

   Expect next

   • Back out the implied multiple from a 4 percent perpetuity at a 12 percent WACC.
   • How much reinvestment does 5 percent terminal growth require?
   • What terminal ROIC would you assume?
3. 076Your model has a circular reference because interest depends on debt and debt depends on cash flow after interest. How do you handle it?Modelling, Excel and dataHardtechnicalFinancial modellingCorporate finance

   Say this

   Three options: calculate interest on the opening balance instead of the average, use average balances with iterative calculation and a circuit breaker, or resolve it with a small macro. For most work I use opening balances, because the accuracy gain from averages is not worth the fragility.

   Then walk it

   1. The loop: interest expense reduces net income, which reduces cash, which changes the revolver balance, which changes interest. With average debt balances the formula genuinely refers to itself.
   2. Option one, opening balance interest. Clean, no circularity, and typically understates interest slightly in a growing debt year. State the simplification in the assumptions and move on. This is what I would do nine times out of ten.
   3. Option two, enable iterative calculation and build a circuit breaker: a switch cell that forces interest to zero, which lets you break the loop and reset when the model blows up into errors. Without the breaker a single bad input propagates hash-value errors through the whole file and you cannot recover it.
   4. Option three, a macro that copies the calculated interest into the input cell and loops until it converges. Precise, but it means the model needs a macro run to be correct, which is a real handover risk.
   5. The reason it matters beyond aesthetics: circularity makes a model unstable, and an unstable model in a live diligence or board process is a liability. Precision that comes at the cost of reliability is a bad trade.
   6. And the sizing argument I would make out loud: on a 500 crore debt balance at 9 percent, opening versus average balances might move interest by 1 to 2 crore, which is inside the noise of every other assumption in the model.

   Where candidates lose it

   Just switching on iterative calculation with no circuit breaker. That is how models become unrecoverable. Also, pretending average-balance precision matters more than stability shows inexperience; say which trade-off you are making and why.

   Expect next

   • How would you build the circuit breaker?
   • How much does the approximation actually cost you?
   • When would you insist on average balances?

Firm tags come from public, anonymous candidate reports on Wall Street Oasis: strong signal, not sworn testimony. Firms are named as the places a question was reported, not as partners of Fin Maverick. Answers are written for this page to show how to think out loud; they are not scripts to recite.