Banking Interview Question Answered: What would you do if I gave you $100,000?
“If I gave you $100,000 right now, what would you do with it?” Ah, the classic “does this kid have a brain?” Question. must be one of the easiest investment banking interview questions you’ll ever have a lot of fun once you’ve figured out your 5-part answer.
But to crush it you must avoid the response killing bug that about 2/3 of the students do; they think the banker is asking them what they they would do with the $100,000 if they had it personally.
And although the question seems directed at you and your personal situation, it is not. Nor is it addressed to the banker interviewing him.
How are you supposed to handle this question then? As a budding consultant, you must first answer this question with a question
“Who is the investor and what are their objectives, risk profile, etc.?”
Yes it’s correct. Put on your $60k year financial planner hat and find out about the type of return that mythical investor wants, cash flow requirements over time, your personal tax situation, preferred asset classes, favorite industries, etc.
PS Unlike management consulting case interviews, don’t expect a banker to offer you that much additional information: 2 or 3 points and they’re usually done. After all, this is a small question in investment banking interviews.
Based on this new information, you can explain what you would do. Suggesting an investment strategy that even remotely takes this new information into account will earn you an A here.
If you want to take your answer to an A+ level…
- put together a various portfolios of stocks, bonds, real estate, cash and other alternative asset classes. Students who fail to mix asset classes and instead offer just one in an “Oh, risk aversion, then I’d put the money in bonds” style, are idiots. That’s a blunt investment strategy with zero ounces of financial finesse: different asset classes offer different risk/return/cash flow/tax etc consequences, so mix and match with that in mind.
- Mention how much of each in $quantitiesno %: This is a small point, but it can make a big difference for bankers.
- Y explain assignments using the investor’s personal information, particularly their risk profile, income requirements over time, lifestyle goals and personal tax situation.
But when all is said and done, don’t be so sophisticated you are confused! Wondering out loud “Oh, but wait, maybe…” like your fucking Drew Barrymore will undo all your hard work in an instant.
PS If the bankers turn around and say the mythical investor is in fact you – and therefore what would ‘you’ do with $100,000? – use the same response strategy as above, but adapt it to your youthful circumstances. Hint: a time horizon of more than 40 years = lots of stock!