Investment Banking interview preparation
Every question below is either traced to a named firm from a public candidate report, or tagged at desk level when we could not trace it. Answers are written the way you would actually say them out loud — answer first, then the mechanism, then the limitation.
100 questions, mapped to the firms that asked them
- Questions
- 100
- Traced to a firm
- 100
- Firms
- 46
- Updated
- September 2026
019Why do you unlever and relever beta, and why does it matter?Harris WilliamsInvestment Banking · Los Angeles · 2025
Say this
Observed beta reflects both the business risk and the leverage of each peer. You unlever to strip out their capital structures so you are comparing pure business risk, then relever at your target's structure.
Then walk it
- Pull raw betas for the peer set. Each one is contaminated by that company's own debt load.
- Unlever each: asset beta equals equity beta divided by one plus one minus tax times debt over equity. Now you have pure business risk.
- Take the median or mean of the unlevered betas. Median is safer because one over-levered peer can drag a mean badly.
- Relever at your target's capital structure, or its target structure if you expect it to change.
- It matters because skipping it means you have imported someone else's leverage into your cost of equity. In an LBO, where structure changes by design, getting this wrong makes the whole discount rate meaningless.
Where candidates lose it
Knowing the formula but not the purpose. If asked 'why does it matter', the answer is comparability of business risk. Say that first, then the mechanics.
Expect next
- Would you use median or mean of the unlevered betas?
- What is the beta of a slot machine?
- How would you get a beta for a private company?
Reported by candidates at Harris Williams (Investment Banking, Los Angeles, 2025). Source: Wall Street Oasis.
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.