That is partly their purpose. Investment bankers and other finance professionals need to be able to work well under pressure, so many interviewers believe that throwing a brainteaser at a candidate is a good way to test an applicant's battle-worthiness. But these questions serve another purpose, too - interviewers want you to showcase your ability to analyze a situation, and to form conclusions about this situation. It is not usually important that you come up with a "correct" answer, just that you display strong analytical ability.
Remember, brainteasers are very unstructured, so it is tough to suggest a step-by-step methodology. There are a couple of set rules, though. First, take notes as your interviewer gives you a brainteaser, especially if it's heavy on the math. Second, think aloud so your interviewer can hear your thought process. Here are some samples:
1. If you look at a clock and the time is 3:15, what is the angle between the hour and the minute hands?
The answer to this is not zero! The hour hand, remember, moves as well. The hour hand moves a quarter of the way between three and four, so it moves a quarter of a twelfth (1/48) of 360 degrees. So the answer is seven and a half degrees, to be exact. ~2. You have a five-gallon jug and a three-gallon jug. You must obtain exactly four gallons of water. How will you do it?
You should find this brainteaser fairly simple. If you were to think out loud, you might begin by examining the ways in which combinations of five and three can come up to be four. For example: (5 - 3) + (5 - 3) = 4. This path does not actually lead to the right answer, but it is a fruitful way to begin thinking about the question. Here's the solution: fill the three-gallon jug with water and pour it into the five-gallon jug. Repeat. Because you can only put two more gallons into the five-gallon jug, one gallon will be left over in the three-gallon jug. Empty out the five-gallon jug and pour in the one gallon. Now just fill the three-gallon jug again and pour it into the five-gallon jug. Ta-da. (Mathematically, this can be represented 3 + 3 - 5 + 3 = 4)
3. You are faced with two doors. One door leads to your job offer (that's the one you want!), and the other leads to the exit. In front of each door is a guard. One guard always tells the truth. The other always lies. You can ask one question to decide which door is the correct one. What will you ask?
The way to logically attack this question is to ask how you can construct a question that provides the same answer (either a true statement or a lie), no matter who you ask.
There are two simple answers. Ask a guard: "If I were to ask you if this door were the correct one, what would you say?" The truthful consultant would answer yes (if it's the correct one), or no (if it's not). Now take the lying consultant. If you asked the liar if the correct door is the right way, he would answer no. But if you ask him: "If I were to ask you if this door were the correct one, what would you say," he would be forced to lie about how he would answer, and say yes. Alternately, ask a guard: "If I were to ask the other guard which way is correct, what would he say?" Here, the truthful guard would tell you the wrong way (because he is truthfully reporting what the liar would say), while the lying guard would also tell you the wrong way (because he is lying about what the truthful guard would say).~If you want to think of this question more mathematically, think of lying as represented by -1, and telling the truth as represented by +1. The first solution provides you with a consistently truthful answer because (-1)(-1) = 1, while (1)(1) = 1. The second solution provides you with a consistently false answer because (1)(-1) = -1, and (-1)(1) = -1.
Perhaps even more so than tough finance questions, brainteasers can unnerve the most icy-veined, well-prepared finance candidate. Even if you know the relationships between inflation, bond prices and interest rates like the back of a dollar bill, all your studying may not help you when your interviewer asks you how many ping pong balls fit in a 747.