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What To Do When You Don’t Know The Answer To A Question In An Investment Banking Interview?

Interview stress

This is perhaps the biggest nightmare of every candidate: 

Being completely unable to answer after receiving a seemingly impossible question. 

Bear in mind that freezing after an interview question can happen even to the best of us, even with the most rigorous preparation. 

First of all, it’s not the end of the world if you don’t know how to answer (contrary to what you may have heard from self-proclaimed career coaches).

Second, there are always tricks that you can use to minimize the damage in case you’re hit with a really tough question, or at least one that you’re not capable of answering.

There are three possible situations when you are asked a particularly challenging question:

  1.  You didn’t understand the question
  2.  You understood the question, but you don’t know what to answer
  3.  You understood the question, but you’re not sure of what to answer

The difference between the second and third cases is that in the latter, you have at least some ideas of what you could reply.

In the former, you are entirely lost, you have simply no idea of what to answer.

Don’t worry, I’ll share with you some strategies that you can use to minimize the damage which have worked well for me in the past (I have received offers following interviews where I was unable to answer more than two questions).

Let’s see what you can do in each of these cases.

Case #1: you didn’t understand the question 

You have two options here.

You can either ask your interviewer to repeat the question by saying: “I’m not sure I understood correctly. Would you mind repeating the question please?”

Or you can try to reformulate the question in your own words by saying: “Just to make sure I understand correctly, are you asking if…Is that the right way to see it?”

The first option is more appropriate when you don’t understand the question at all.

The second option is more suitable when you understood part of the question, but you are not sure of what is being asked precisely.

In both cases, you show inquisitiveness and a willingness to get things right. Hence, none of these options will harm you.

I would even go further by saying that sometimes, using the second technique may even benefit you, because it demonstrates your ability to interpret and summarize things, which is a critical skill to possess in finance.

In some instances, I would even use the second option even if you understood the question perfectly. I know it might seem useless, but it’s not.

When you understand a question very clearly, reformulating the question of your interlocutor benefits you in two ways:

  1. It conveys to the interviewer that you are capable of summarizing things effectively and that you care about getting things right
  2. It gives you a few more seconds to think about your answer.

Further, when your interlocutor repeats the question, you already know what he wants to know so in this case and in this case ONLY, you don’t need to actively listen; just use your brain cells to craft the best possible answer in this additional slice of time that you’ve created.

Again, simple but effective. 

Case #2: you understood the question, but you don’t know what to answer

In this case, use the previous trick that I have mentioned: reformulate the question to give you some additional time to think about an answer.

Use this time to think if there is any way to dodge the question effectively.

One way to do that is to use “bridge answers”: you start by acknowledging your vulnerabilities, and you then make a smooth transition towards where you are strong (the things you talked about following this transition have to be somewhat related to what is being asked, of course).

For example, let’s say we ask you: “Do you know if this stock trades at a premium or discount vs. its peers?”

You could answer, assuming you did some research on this stock:

“Well, I don’t know specifically how it trades vs. peers…But what I do know is that this stock trades at a 31x P/E, which is not unreasonably high in the fast-growing industry in which this company operates. Further, this stock is growing faster than the sector average, with an earnings growth of X% vs. Y% for the sector. So based on my understanding, this stock doesn’t seem overvalued to me, but I might be wrong.”

With this answer, you wouldn’t answer your interviewer’s question, who just wanted to know how this stock traded relative to its peers.

However, even though you wouldn’t provide a direct answer in this case, you would still demonstrate some degree of understanding of the sector of this stock and convey that you have at least an idea of the level of valuation of this stock.

Further, the reasoning makes sense, and you would project humility at the end by saying that you could be wrong. All in all, the interviewer is likely to be satisfied with your answer, even if it doesn’t clearly answer his question.

I’ve used this technique a lot of times during some of my hardest interviews, and I can guarantee you that if you use it well, it will work like fire.

However, if, despite the additional time that you gained, you really don’t know the answer, and if there is no way to dodge the question (which can be the case for precise technical questions that require knowledge that you don’t have, such as “What is the WACC?”), your best option is to simply say: I don’t have the answer to your question.

Obviously, that’s not ideal. But there is nothing else you can do in that situation, and the best way to proceed is to show humility by acknowledging your ignorance.

It certainly won’t benefit your chances of getting in, but it won’t necessarily eliminate you from the process either. You minimize the blooding by choosing this option in this case.

Case #3: you understood the question, but you’re not sure of what to answer 

This happens when you understand the question and you have some elements of answer that comes to your mind, but you’re not sure if they are right.

The first strategy that you can use (which I used to employ very often) is to ask the following question to the interviewer: “Could you give me some time to gather my thoughts?”.

Saying that will give you time to structure your thoughts and improve the quality of your answer. Furthermore, it will show the recruiter that you are willing to analyze things in detail before communicating, which is a critical skill to have in finance.

Don’t worry about awkward silences. It doesn’t really matter. What matters is that you have the time to refine your answers and ace the questions that are being asked.

Many candidates who have enrolled in this training ask me: “How much time do I have when I gather my thoughts like this? Is there a risk that I let the interviewer wait for too long?”

That’s a sensible question. As a rule of thumb, I would say spend no more than 1 minute thinking about your answer if you’re writing your ideas on a sheet of paper, and no more than 30 seconds if you are thinking in your head.

The reason for that is that time will seem much longer from the recruiter’s perspective when he can see your eyes wandering around without real purpose. When you are focused on paper, it makes the silence slightly less awkward.

The second strategy that you can employ here is to reformulate the question of the interviewer to gain some time, similar to what I have already suggested above.

This gives you additional time to think more deeply about the robustness and truth of the elements of answer that you have in mind, and, equally importantly, to think about how you could structure and articulate your answer.

If you still don’t know if your potential answer is correct after your interviewer has repeated his question, the key here is to express your answer in very cautious terms.

For example, start your sentences by: “In my understanding…” and use the expression “but I might be wrong” to close your sentences. It will show precaution and excuse yourself from being wrong in case you are indeed wrong.

If you want more tips on how to be successful during investment banking interviews, check out our detailed course here. You will have access to a list of 125+ commonly asked fit and technical questions in investment banking, with examples of high-performing answers for each question. Learn more on this page.


A word about the author

Aurelian Tran is the founder of Alpha Lane and an ex-Goldman Sachs analyst who has spent 4+ years working in the investment banking industry.

He founded Alpha Lane to help students and young professionals achieve their highest professional ambitions, by securing offers at top-tier financial institutions.