Nick's Finance Interview Questions

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This section is on Finance Interview Questions...

Largely Fixed Income.

These are some of my favourite interview questions to ask in a finance interview.

If you have questions you've been asked and you want an answer, Contact  

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2. Finance Interview Questions - What is a bond ?

What is a bond ?


A debt instrument issued for a period of more than one year with the purpose of raising capital by borrowing.

The Federal government, states, cities, corporations, and many other types of institutions sell bonds.

Generally, a bond is a promise to repay the principal along with interest (coupons) on a specified date (maturity). Some bonds do not pay interest, but all bonds require a repayment of principal.

When an investor buys a bond, he/she becomes a creditor of the issuer. However, the buyer does not gain any kind of ownership rights to the issuer, unlike in the case of equities.

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1. Finance Interview Questions - 1 year Call option

For a stock, the spot price is 100, Volatility is zero and the risk free interest rate is 5%.
What's the price of the 1 year at the money call option ?

there will be no

there will be no vol is zero anf option is at atm.


Where is the strike price?..Incomplete question....


"At the money"


price is 0 according to Black-Scholes


..but then again, this is not realistic since it's impossible that the volatility of the price of the share is zero.

Because volatility is zero so

Because volatility is zero so the rate of return is riskless, therefore the stock price will go up to 105 for sure and will give the payoff of 5. Now we just need to discount it to time 0 using discount rate 5%. It will give us something around 4.75.