Finance accounting summer intern Interview Questions


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Morgan Stanley
Quantitative Finance Summer Associate was asked...5 August 2010

At a party everyone shakes hands, 66 hand shakes occur, how many people are at the party?

9 Answers


You can suppose there are n people in the room and think of them in a row. The first one has to shake hands with (n-1) people (because he doesn't have to shake hands with himself). The second one has already shaken hands with the first one, so he has (n-2) shakes remaining... and so on. So you have to sum: (n-1)+(n-2)+(n-3)+...+1= (n/2)*(n-1) Then you have to solve (n/2)*(n-1)=66 and you get n=12. Less

n(n-1)/2=66 so n=12

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You have a Balance Sheet, Income Statement, and a Cash Flow statement. If you could choose two out of the three statements, which two would you choose and why?

6 Answers

You can make the SCF from BS and IS

This is a straight accounting question. You can make Cash Flow from Balance Sheet and Income Statement, so BS and IS is the answer! Less

@hussein: There is only one correct answer, and it is the Balance Sheet and Income Statement. Less

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Morgan Stanley

There are two stocks with the same expected value, with variance 0.3 and 0.2 and correlation 0.5. What proportion of each stock do you invest in to yield a minimum risk portfolio?

5 Answers

17/44 of the stock with variance of .3 and 27/44 from the stock with variance of .2 Less

No, if you can short, the variance could be reduced even further since the stocks are correlated. Less

Above answers used variance in portfolio variance equation, rather than std. Answer is .386 for security with var .3, and .613 for security with var .2 Less

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Morgan Stanley

A use 5 hours finish a job. B use 8 hours finish it. How long A and B take it together?

4 Answers

I mean it is not correct (but probably I do not have got true): 1 hour A can make 20% (1/5) B can make 12.5% (1/8) A+B can make 32.5% (1/5 + 1/8 = 13/40) The work will be finished at 100% (1) 1 hour - 32.5% (13/40) x hour - 100% (1) x = 1*1/(13/40) = 40/13 = 3.077 (hours) tha half of the equation was good, but: 8 = X + 1.6*X = 2.6X; -> x=8/2.6) Please post a comment if I do not have true!!! Less


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Morgan Stanley

If W is standard Brownian Motion, for what values of n is W^n still a martingale?

3 Answers

By Ito W^n is a martingale for n=0,1

Agree, for any n>1 you get a drift term

Xt is a martingale you get f(Xt) is a martingale if f is linear otherwise convexity or concavity will increase or decrease the expectation, think of Jensen inequality. Less

Morgan Stanley

Evaluate the integral from 0 to pi/6 of sec(x) dx.

3 Answers

ln(root 3)


Reaching back to high school, I'd say -.5


How would you value X company? Calculate FCF, working capital, enterprise value, etc. Does anything strike you as odd about these financial statements? Which? Why?

2 Answers

DCF, transaction comps, trading comps. FCF= NI +D/A -change in net working capital -capex. Working capital = current assets- current liabilities. Enterprise value = market cap + debt - cash + minority interest/pref shares. Less

For FCF ... assuming FCF to the firm, i.e. FCFF, I think the "interest paid" needs to be added back. Working capital, depending upon data given, narrowed down to (Inventories + A/c Receivables - A/c Payables). Less


What words describes you

2 Answers

How do others describe you



If given $100 to invest today and you earn 10% the first year, and then reinvest all the money and lose 10% the next year, do you end up with a gain or a loss?

2 Answers


you have a loss by 1 Rupee

T.D. Security

What do bankers use a a measure to evaluate companies

2 Answers

3 forms of repayment. 1) cash flow from operations, 2) guarantor support, 3) collateral support for repayment upon liquidation. Less


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