I contributed to the below post by Beecher Tuttle of efinancialcareers.com.

A cover letter is an opportunity to differentiate yourself from a stack of similar resumes. But more so, it’s a chance for hiring managers to weed out candidates who show poor judgment. Ask any recruiter or hiring manager – a bad cover letter hurts you more than a great cover letter improves your chances.

Below are the nine most common and detrimental mistakes made by candidates when crafting a cover letter.

It’s Too Long

Length is the first thing recruiters and hiring managers mention when it comes to cover letter errors. Decision-makers don’t have the time or patience to read a novel, said Roy Cohen, a finance-focused career coach and author of “The Wall Street Professionals’ Survival Guide.”

One hiring manager at Barclays said that he spends between 15 and 30 seconds reviewing a cover letter, and will completely ignore those that look are too long. Mostly, he spends the time scanning for obvious errors that help him shorten his stack of applicants.

“People skim cover letters, said Hallie Crawford, an Atlanta-based career coach. “Make your cover letter skimmable.”

A good cover letter should be made up of three fairly short paragraphs, according to experts.

READ THE REST

Related:

• Ten words that should never appear on a banking resume.
• Confessions of a Recruiter: What Candidates Should Watch out For
  

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By Girl Banker

Options are financial products that derive their value from a change in the value of another underlying product. Options can be bought on many underlying products including but not limited to:

• A share price (i.e. the market value of a company)
  
• An interest rate
  
• An exchange rate
  
• A corporate or government bond
  
• Real commodities, e.g. oil, gold, wheat, pork bellies
  

An option is a type of derivative. A derivative derives its value from a change in the value of another underlying product. All options give the buyer the right but not the obligation to do a given thing at a given time. 

Essentially, options can be viewed as insurance contracts. You get paid if a certain undesirable event happens. The price or cost of an option is called the premium.

Extracted from To Become an Investment Banker

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by Girl Banker 

All businesses are owned by a private individual or group of private individuals when they start out. After a certain point, a company can choose to raise equity capital from the public by listing on a stock exchange in an initial public offering.

Once shares have been listed on a stock exchange they are available to anyone (even you and me), to buy and sell in the secondary market.

Money raised in an IPO goes straight to a company from investors. However, after those shares are listed, they are bought and sold between investors and the company does not benefit from these secondary market transactions.

For example, if I bought shares in LinkedIn as a private investor in the IPO when they were listed on the New York Stock Exchange on 19 May 2011, I would have paid USD83 for them. Demand was very hot for these shares; if I had sold them to you the day after the IPO, I could have sold them for as much as USD107 and bagged the difference (USD24, in this case) as profit. The shares were undervalued at the point of listing.

All day long people buy and sell shares: high demand to buy shares pushes the price up; a high supply of shares offered for sale forces the price down.

The IPO process is governed by a lot of documents and conventions. To guide it through the process a company hires specialists; two key specialists are an investment bank and a law firm.

The investment bank knows the process inside and out and it has access to a list of investors that may be interested in buying the listing company’s shares. The lawyers understand and draft the transaction documentation. Together they produce an IPO prospectus, a legal document filed with regulators detailing any reasonable information a prospective investor needs to make the decision of whether or not to buy the shares being offered.

Extracted from: To Become an Investment Banker

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Have a technical interview lined up in Asset Management? Then make sure you can answer each of the below questions competently. Your job depends on it!

1.    What is value investing and how is it different to growth investing?

2.    What's the formula for free cash flow?

3.    What is the difference between net income and free cash flow?

4.    Describe 3 important ratios used in value investing including their formula.

5.    What traits might an undervalued stock exhibit?

6.    What sort of information would you expect to see on a balance sheet?

7.    Explain one important way in which a balance sheet is different from both an income statement and a cash flow statement.

8.     What is WACC?

9.     What is the capital asset pricing model?

10.   What is leverage?

11.   Do you know any leverage ratios? Which ones?

12.   Please describe one or more studies that validate the virtues of value investing?

13.   Tell me about a stock that might be undervalued in the S&P500 and why.

14.   Tell me about one key proponent of value investing.

Book a mock interview to ace that interview!

Best of luck!! 

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• To get chapter 1 for FREE: like Girl Banker on Facebook
  
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Have a technical interview lined up with Debt Capital Markets (DCM)? Then make sure you can answer each of the below questions competently. Your job depends on it!

1.    Describe four key differences between debt and equity.

2.    What is leverage?

3.    Why might a bond sell at a discount to par?

4.    What’s the difference between the clean price and the dirty price of a bond?

5.    What is credit risk?

6.    What’s a callable bond?

7.    What is a yield curve?

8.    Can you explain the shape of the yield curve?

9.    What is an FX forward?

10. What are options?

11. You’re running a US company but have issued a GBP bond:

• a.    Why might you do that?
• b.    What is the main risk you are exposed to?
• c.     How would you cover that risk?

Book a mock interview to ace that interview!

Best of luck!!

Get ahead of the competition with your own copy of To Become an Investment Banker

• To get chapter 1 for FREE: like Girl Banker on Facebook
  
• Maximise your chances with out FREE 4 month eCourse

Get ahead of the competition with your own copy of To Become an Investment Banker

• To get chapter 1 for FREE: like Girl Banker on Facebook
  
• Maximise your chances with out FREE 4 month eCourse

Have a technical interview lined up in corporate finance (a.k.a. IBD)? Then make sure you can answer each of the below questions competently. Your job depends on it!

1.  What is the difference between a buy-side advisor and a sell-side advisor? Which would you prefer? 
    
2.  Do you know any valuation metrics? Describe them. 
      
3.  What do you think about the current state of the US economy?

4.  Explain one important way in which a balance sheet is different from both an income statement and a cash flow statement.

5.  What is leverage? 

6.  Do you know any leverage ratios? Which ones?

7.  What is WACC? 

8. What is the capital asset pricing model? 

9.  Describe five synergies that would result from a merger between Vodafone and Sky TV. 

10.  Tell me about 3 businesses that are probably flourishing in the current economic environment and explain why you think they would be flourishing. 

11.  Tell me about a stock you like and why.

12.  What type of information goes into a pitch book? 

Book a mock interview to ace that interview!

Best of luck!!

Get ahead of the competition with your own copy of To Become an Investment Banker

• To get chapter 1 for FREE: like Girl Banker on Facebook
  
• Maximise your chances with out FREE 4 month eCourse

by Girl Banker 

Listen to the iTunes podcast instead.

Competency-based questions are designed to elicit your  key qualities, e.g. your experience with working with others (team work), being a leader, taking initiative, overcoming obstacles, making quick decisions and so on. Here are some common questions:

1. What do investment banks do? How are investment banks different to commercial or retail banks?

2. Why do you want to work in corporate finance / sales / trading / asset management? Why do you think you would be good at corporate finance / sales / trading / asset management?

3. Why do you want to work for this bank?

4. Why should this bank hire you? What do you think distinguishes you from other candidates that have applied for this position?

5. Do you know this bank’s key competitors? What do you know about other investment banks?


6. Run me through the key aspects of your résumé/CV?

7. Describe yourself 

This is a very open-ended question so you should ask if there is anything the interviewer particularly wants you to talk about, e.g. your work experience or your ambitions, your degree and why you chose it, your university and why you landed there, your extracurricular activities etc.

8. You’re currently doing a non-financial course in university. Given this fact, what attracted you to investment banking? With so little financial knowledge, how would you be useful to us?

9. Would you describe yourself as hard-working?

10. What are your key strengths? 

11. How would someone that knows you well describe you?

12. What do you like the most about yourself?

13. What is your biggest achievement?

14. Do you have any weaknesses? What would you classify as your key weaknesses?

15. Have you ever failed? Have your plans ever not worked out? Tell me about a time when something went wrong. How did you resolve it?

16. What is the biggest failure you have ever had?

17. The grades on your résumé/CV are not the best I have seen today. Why should I hire you over someone with a better academic profile? 

18. Which other firms have you applied to? Which other firms are you interviewing with? 
Have you received any internship / job offers yet?

19. Are you only applying for positions in investment banks or are there other sectors you are considering?

20. How did you prepare for this interview?

21. Are there any questions you would like to ask me?

If you can fully prepare just the above questions for your competency based interview, you will be more than prepared. To Become an Investment Banker provides guidance on how to answer each one of these questions effectively.

Book a mock interview to ace that interview!

Get ahead of the competition, increase your chances of getting an investment banking job with your own copy of To Become an Investment Banker; like Girl Banker on Facebook or subscribe to get chapter 1 for FREE. 

by Girl Banker 

Listen to the iTunes podcast instead.

You cannot go to a corporate finance or asset management interview without knowing the CAPM.

The CAPM model shows that the return to equity is a positive function of risk: 

BBU (Blissful Books United) is the fictional book store created in my book To Become an Investment Banker.

• re(BBU) is the cost of equity to BBU or said differently, it is the return that shareholders in BBU expect as a result of holding BBU shares.
  
  
• r(f) is the risk free rate
  
  

o We can use the return on a 10-year US Government bond as a proxy for the risk-free rate, rf.
o US Government bond yields are relatively easy to get a hold of online. Some portals will even allow you to download historical data into Excel.
o The downgrading of the US Government rating from AAA to AA+ by Standard & Poor's rating agency makes the usual text book assumption that the US Government is risk free debatable.

• β(BBU) is a measure of how volatile BBU’s share price is relative to the average of the market as proxied by a domestic stock index, e.g. the S&P500 
  

o If BBU is less volatile than the market, on average, β(BBU) will be less than 1.
o If BBU is more volatile than the market, on average, β(BBU) will be more than 1.

• {r(m) – r(f)} is the difference between the expected market return and the risk free rate.

You might also like:
What is WACC, the Weight Average Cost of Capital?
Where can you get the cost debt used to calculate WACC?

Get ahead of the competition, increase your chances of getting an investment banking job with your own copy of To Become an Investment Banker; like Girl Banker on Facebook or subscribe to get chapter 1 for FREE. 

by Girl Banker 

Listen to the iTunes podcast instead. 

The cost of debt is very easy to calculate if the company has debt liabilities on its balance sheet. 

Because interest is tax deductible (in most countries) this tax benefit has to be subtracted from the cost of debt.

Most companies do hold debt on their balance sheet so this is by far the most common route. 

If you were unfortunate enough to find yourself with a company that had completely no debt on its balance sheet, the next best route would be to use a proxy. A reasonable proxy would be the cost of debt of very similar companies. Hopefully you would have a sufficient sample of similar companies that have issued debt instruments recently from which to calculate such a proxy. 

If no similar companies were available then an assumption would have to be made in collaboration with your debt syndicate team based on the current economic environment. However, this would likely lead to your using a higher cost of debt than is necessary to keep your numbers realistic. It's not the best way of coming up with a cost of debt number but it would be the best you could do in the circumstances.

As a reminder, this is the formula for WACC, the Weighted Average Cost of Capital:

Where r(d) is the average cost of debt and r(e) is the cost of equity. 

You might also like:
What is WACC, the Weighted Average Cost of Capital?
What is the Capital Asset Pricing Model, CAPM?

Get ahead of the competition, increase your chances of getting an investment banking job with your own copy of To Become an Investment Banker; like Girl Banker on Facebook or subscribe to get chapter 1 for FREE.