Investment Banking
Prepalyst has 20 debt capital markets interview questions with model answers, covering ratings, spreads, tenor and covenant packages, and pricing a new issue. Every question is graded on technical accuracy, completeness and interview communication. Practice is free.
Green bonds are a growing trend. This tests understanding of ESG in debt markets.
What are green bonds, and how do they differ from conventional bonds in terms of structure and pricing?
The yield curve is fundamental to bond pricing. This tests understanding of rate environment.
How does the yield curve affect bond pricing, and how do you determine the appropriate benchmark for a bond issuance?
An analyst-level arithmetic check used when preparing an issuance summary and sources-and-uses bridge.
A company issues $500 million face amount of 10-year notes at 99.25. Underwriting fees are 35 bps of face amount and legal, rating, and printing costs total $0.60 million. Calculate gross cash proceeds, total transaction…
A core DCM screening calculation used when a banker discusses preliminary pricing with an investment-grade issuer.
A BBB-rated industrial company plans to issue a new five-year USD senior unsecured bond. The on-the-run five-year Treasury yields 3.80%, and comparable bonds indicate the new issue should price at +145 bps to Treasuries.…
A first-round DCM question that checks whether a candidate can turn investor language into an issuer-cost discussion.
An investor says a proposed bond needs a new-issue concession. What does that mean, why might an issuer pay one, and why is the concession not simply a fee paid to the banks?
The foundational DCM question. Understanding the process is essential for the role.
Walk me through the process of a corporate bond issuance. What are the key steps and who are the key participants?
A DCM associate asks for a recommendation before a client call on how to finance a near-term acquisition.
A BBB consumer company needs $600 million for an acquisition closing in two weeks. It has $400 million of floating-rate revolver debt, stable dollar cash flows, and no near-term maturities. The DCM desk can launch…
Digital bonds are an emerging trend. This tests understanding of blockchain in capital markets.
What are digital bonds, and how does the issuance process differ from traditional bond issuances?
Municipal bonds have unique tax treatment. This tests understanding of the muni market.
What are the key differences between municipal and corporate bonds, and how does tax treatment affect pricing?
The core mechanic of a debt capital markets desk.
An investment grade issuer wants to raise $750m of 10-year notes. Walk me through how you arrive at the coupon.
Bond structuring is core to DCM. This tests understanding of debt terms and investor preferences.
What are the key decisions in structuring a bond issuance, and how do you balance issuer needs with investor preferences?
Syndication is how debt is distributed. This tests understanding of the sales process.
Explain the syndication process for a bond issuance. How do you determine the syndicate structure and allocate bonds?
High yield is a distinct market with different dynamics. This tests understanding of the segment.
What are the key differences between the high yield and investment grade bond markets, and how does this affect issuance strategy?
Tests whether you understand that the two markets are structurally different, not just differently priced.
How does issuing high yield differ from issuing investment grade. Beyond the fact that the coupon is higher?
Credit spreads are the core pricing metric. This tests understanding of credit risk.
What factors determine credit spreads for corporate bonds, and how do you assess whether current spreads are appropriate?
A DCM superday case tests whether you can turn a maturity schedule into an actionable financing recommendation rather than merely reciting current spreads.
A BBB- issuer has $1.2bn of notes maturing in 18 months and $900m maturing 30 months from now. It has $400m of cash, a $750m undrawn revolver, and forecast annual free cash flow of $250m before debt maturities. The CFO…
A live DCM execution judgement test: the desk needs a pricing recommendation, not a description of book-building.
A BBB+ issuer is marketing $1.0 billion of 10-year notes at initial price thoughts of Treasury +165 to +170 bps. Two hours later, the book shows $4.0 billion of demand. However, one hedge fund accounts for $1.4 billion,…
ABS is a specialized market. This tests understanding of securitization.
Explain the structure of asset-backed securities, and how do they differ from corporate bonds?
Convertibles bridge debt and equity. This tests understanding of hybrid securities.
Explain the structure and economics of convertible bonds. When are they appropriate for issuers, and how do you value them?
Emerging market debt has unique risks. This tests understanding of sovereign risk.
What are the key differences between emerging market and developed market corporate bonds, and how do you assess sovereign risk?
Write your answer, get it graded on technical accuracy, completeness and communication, and see exactly which mechanic you missed.
Firm names indicate where a question type is commonly reported in interviews. They are not sourced from, endorsed by, or affiliated with the firms named.