Bank Interview question and answer
Bank Interview question and answer
Beta tells you how much the price of a given security moves relative to movements in the overall market. A Beta of 1 means that if the market moves, the stock moves in unison with the market. A Beta < 1 means that if the market moves a certain amount, the stock will move less than that amount. A Beta >1 means that if the market moves a certain amount, the stock will move more than that amount.
Q.Define CAPM ?
CAPM is the capital asset pricing model, and it is a model designed to find the expected return on an investment and therefore the appropriate discount rate for a company’s cash flows.
Q.What is accretion and dilution?
Accretion is asset growth through addition or expansion. Accretion can occur through a company’s internal development or by way of mergers and acquisitions. Dilution is a reduction in earnings per share of stock that occurs when additional shares are issued or the stock changes into convertible securities.
Q.Walk me through a DCF…
A DCF proposes that the value of a productive asset equals the present value of its cash flows. You’ll also need to talk about relative valuation multiples, in which you value a company similar to its peers based upon measures like enterprise valuation ,enterprise EBITDA value and the price /earningsratio.
Q.What are the different methods of valuation and what are their pros and cons?
The three methods are DCF, public comparables) vs. transaction comparables (similar companies that have been. Each has its advantages: a DCF shows the maximum a company is worth – not just the value the markets assign to it. The transaction comparables take into account the synergies that can be expected to flow from a deal. For more information, see this tutorial from NYU Stern. Click here for more information on company valuation.
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