The investment banking interview question we’re going to go over today is “What are the different types of debt and how are they different?” Here’s what you can say.
Interview Answer
“The three common types of debt are: Revolver, Term Loan, and Bond.
Revolver is the most senior type of debt. It’s like a credit card in that borrowers can borrow, repay, borrow again and then repay again as long as they stay within the given limit.
Term Loan is the next most senior type of debt. Borrowers can repay it before the maturity debt.
Bond is relatively junior in the capital structure. Borrowers must keep incurring interest on it until maturity and cannot repay it in advance.”
Additional Tip
That’s what you can say for this interview question: “What are the different types of debt and how are they different”. One sentence identifying the type of debt and its relative seniority, followed by one sentence explaining what makes it special. Don’t go into a monologue, keep it short and sweet.
More IBD Interview Questions
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