# Guesstimates

Vault Guide to Finance Interviews Brainteasers and Guesstimates

Stress Tests

Perhaps even more so than tough finance questions, brainteasers and guesstimates can unnerve the most icy-veined, well-prepared finance candidate. Even if you know the relationships between inflation, bond prices and interest rates like the back of a dollar bill, all your studying may not help you when your interviewer asks you how many ping pong balls fit in a 747. That is partly their purpose. Investment bankers and other finance professionals need to be able to work well under pressure, so many interviewers believe that throwing a brainteaser or guesstimate at a candidate is a good way to test an applicant’s battle-worthiness. But these questions serve another purpose, too – interviewers want you to showcase your ability to analyze a situation, and to form conclusions about this situation. It is not necessarily important that you come up with a correct answer, just that you display strong analytical ability

Acing Guesstimates

We’ll start by discussing guesstimates, for which candidates are asked to come up with a figure, usually the size of a market or the number of objects in an area. Although guesstimates are more commonly given in interviews for consulting positions, they do pop up in finance interviews as well. Practicing guesstimates is a good way to begin preparing for stress questions in finance interviews, as they force candidates to think aloud – precisely what interviewers want to see. The most important thing to remember about brainteasers, guesstimates, or even simple math questions that are designed to be stressful is to let your interviewer see how your mind works. The best approach for a guesstimate question is to think of a funnel. You begin by thinking broadly, then slowly narrowing down the situation towards the answer. Let’s look at this approach in context. Let’s go back to the question of how many ping pong balls fit in a 747. The first thing you need to determine is the volume of the ping pong ball and the volume of a 747. For any guesstimate or brainteaser question, you will need to understand whether your interviewer will be providing any direction or whether you will have to make assumptions. Therefore, begin the analysis of a guesstimate or brainteaser question with a question to your interviewer, such as, “What is the volume of a single ping pong ball?” If the interviewer does 134

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Vault Guide to Finance Interviews Brainteasers and Guesstimates

not know or refuses to provide any answer, then you must assume the answer. If they do provide the information, you may ask a series of followup questions. For this example, let’s assume your interviewer wants you to make the assumptions. Your answer might go something like this: Let’s assume that the volume of a ping pong ball is three cubic inches. Now let’s assume that all the seats in the plane are removed. I know that an average refrigerator is about 23 cubic feet, and you could probably fit two average people in the space occupied by that refrigerator, so let’s say that the volume of an average person is 12 cubic feet, or 20,736 cubic inches Okay, so a 747 has about 400 seats in it, excluding the galleys, lavatories, and aisles on the lower deck and about 25 seats on the upper deck. Let’s assume there are three galleys, 14 lavatories, and three aisles (two on the lower deck and one on the upper deck) and that the space occupied by the galleys is a six-person equivalent, by the lavatories is a two-person equivalent, and the aisles are a 50-person equivalent on the lower deck and a 20-person equivalent on the upper deck. That’s an additional 18, 28, and 120 person-volumes for the remaining space. We won’t include the cockpit since someone has to fly the plane. So there are about 600 personequivalents available. In addition to the human volume, we have to take into account all the cargo and extra space – the...

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