[vishnugupta]

After they said "I don't know" I'd then encourage (or nudge) them to derive a solution. It gave me a very good insight into their thought process and their ability to apply their knowledge to solve an unseen problem.

For instance, students (during campus interview) would at some point reach a dead end while explaining process scheduler. However after encouraged to work it out about 70% ended up with some version of timer interrupt. It was fascinating to watch them go through the process.

[lhnz]

It depends on what you mean by derive a solution. If a candidate doesn't know an algorithm they couldn't be expected to derive it on the spot.

In many cases the popular algorithms were carefully designed by Computer Scientists as part of their research. People don't pass that type of test because of the ability to derive solutions on the spot, they pass based on their skill at rote memorisation and application.

(I absolutely agree that if despite not knowing they show signs of being able to reason their way towards something sensible - robust, likely to be efficient, etc - that is a very good sign.)