Morningstar Interview Questions, Process, and Tips

30 Questions
Difficulty Moderate

Q1. Difference between Cmbs vs Rmbs
Ans. 
CMBS are securities backed by commercial mortgages, while RMBS are securities backed by residential mortgages.
• CMBS are backed by commercial properties such as office buildings, shopping centers, and hotels.

• RMBS are backed by residential properties such as single-family homes, condos, and townhouses.

• CMBS tend to have higher loan amounts and lower prepayment rates compared to RMBS.

• RMBS are more sensitive to changes in in...read more
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Q2. Why you want to work Morningstar
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Q3. Difference between bankruptcy and insolvency
Ans. 
Bankruptcy is a legal process where a person or business is unable to repay debts, while insolvency refers to a financial state of being unable to pay debts.
• Bankruptcy is a legal status declared by a court when a person or business cannot repay debts.

• Insolvency is a financial state where a person or business is unable to pay debts as they become due.

• Bankruptcy involves a formal legal process, while insolvency is a fina...read more
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Q4. Prepayment risk meaning
Ans. 
Prepayment risk refers to the risk that borrowers will pay off their loans earlier than expected, resulting in a loss of future interest payments for the lender.
• Prepayment risk is common in mortgage-backed securities, where homeowners can refinance their mortgages at lower interest rates, causing the investor to lose out on expected interest income.

• It can also occur in bonds or other fixed-income securities when intere...read more
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Q5. What is asset backed security and how is different from CMBS
Ans. 
Asset backed security is a type of financial security backed by a pool of assets, while CMBS specifically refers to securities backed by commercial real estate loans.
• Asset backed securities are backed by a variety of assets such as credit card receivables, auto loans, or student loans.

• CMBS are specifically backed by commercial real estate loans, such as office buildings, shopping centers, or hotels.

• Asset backed securit...read more
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Q6. What has more prepayment risk CMBS, RMBS, ABS
Ans. 
CMBS has more prepayment risk compared to RMBS and ABS.
• CMBS (Commercial Mortgage-Backed Securities) typically have higher prepayment risk due to the nature of commercial real estate loans.

• RMBS (Residential Mortgage-Backed Securities) have lower prepayment risk compared to CMBS as residential mortgages are less likely to prepay.

• ABS (Asset-Backed Securities) generally have lower prepayment risk as the underlying assets m...read more
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Basic questions on basic knowledge

Q1. IPO,Capital Market
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Q2. What is tge formula of receivable turnover?
Ans. 
Receivable turnover is a financial ratio that measures a company's efficiency in collecting its accounts receivable.
• Receivable turnover = Net Credit Sales / Average Accounts Receivable

• Net Credit Sales is the total sales made on credit minus any returns or allowances

• Average Accounts Receivable is the average of the beginning and ending accounts receivable balances

• A higher receivable turnover indicates that a company is ...read more
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Q3. What is formula for liquidy ratio?
Ans. 
Liquidity ratio measures a company's ability to pay off its short-term debts using its liquid assets.
• Liquidity ratio is calculated by dividing a company's liquid assets by its short-term liabilities.

• The formula for liquidity ratio is: Liquidity Ratio = (Liquid Assets / Short-term Liabilities)

• Liquid assets include cash, marketable securities, and accounts receivable.

• Short-term liabilities include accounts payable, short...read more
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Q1. What are corporate actions?
Ans. 
Corporate actions are events initiated by a public company that can affect its stock price or ownership structure.
• Corporate actions include dividends, stock splits, mergers, acquisitions, spin-offs, and rights issues.

• These actions can impact shareholders by changing the value of their investments or the number of shares they own.

• Investors need to stay informed about corporate actions to make informed decisions about th
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Q2. What is capital repayment?
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Capital repayment refers to the process of paying back the original amount borrowed in a loan or investment.
• Capital repayment is the return of the initial amount borrowed or invested.

• It does not include any interest or additional fees.

• Common examples include paying off a mortgage or returning the principal amount of a bond.

• Capital repayment reduces the outstanding balance of a loan or investment.
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