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Are virtual interviews better than in-person?
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I do something like this for work. If some threw those numbers out off the top of their head I’d be pretty impressed.
In these case interviews, the questions you ask are almost more important than the answer you arrive at. So let’s say you ask those three questions and the interviewer gives you number (they’d like be pretty close to your guesstimates so kudos).
Other responders are right - the duration of that balance matters. Ignore time value of money, that’s not what they are asking about and they’ll get bored of you go down that path. Some other questions to ask may include:
- how do fixed and variable costs related to account volume?
- how many more servers / storage are required for the increased volume?
- we are going to have to deal with the regulators, what’s that going to look like?
- what is new customer outreach going to look like?
- what about reward program honoring and point conversion stuff?
You are absolutely right to start with thinking about interest income. Also, what’s the FICO on the book? Are we buying the paper at a premium or a discount?
These questions should be considered relative to all of the cost.
This is a great interview question. I’m going to steal it. I work in credit by the way so sorry for needing out.
"Citibank is considering purchasing another credit card company If the acquisition is made, Citibank will gain access to 100,000 new card holders. What is the estimated value of this acquisition?”
How would you approach this? Make an assumption about the percent of people that carry a balance, the balance they carry, and the interest? If I had to guess, that would be 40%, $4,000, 18% .... and turns out, I'm pretty darn close (37%, $5,700, 19.2%). But that only accounts for one year (and little else).
This isn't for me and isn't an actual case question he's been given. I've found this question all over the internet, but none worked out.
Curious for any input you may have and to see the different approaches people could take on this!
That covers interest income, which is a good start. A better answer would also estimate fee income and interchange revenue, and factor in loss rates. Even better would factor in cross sell potential for all the newly acquired customers.
NPV calculation? Calculate values for future years and use a discount factor
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I'm surprised no one is asking about the value of trying to sell 100k new customers some of Citi's other paid products and services.