New Zealand Financial Markets Association Accreditation Exam Questions and Answers
Question 1. A fund earns a gross return of 6.00% for a year and incurs annual expenses equal to 1.00% of assets,
with no other adjustments. What is the approximate net return?
A. Approximately 6.00%
B. Approximately 7.00%
C. Approximately 5.00%
D. Approximately 1.00%
Correct Answer: C. Approximately 5.00%
Explanation: Under the simplified assumptions, expenses reduce the gross return approximately one-for-one. 6.00% - 1.00% =
approximately 5.00%. Actual reported performance can differ because of timing, compounding, transaction costs, taxes, and the
precise method used to accrue expenses.
Question 2. Currency A is quoted at 1.1666 units of Currency B per A, and Currency B is quoted at 113.00 units of
Currency C per B. What is the implied Currency C per Currency A cross rate?
A. 96.87 units of Currency C per Currency A
B. 0.0103 units of Currency C per Currency A
C. 131.82 units of Currency C per Currency A
D. 114.17 units of Currency C per Currency A
Correct Answer: C. 131.82 units of Currency C per Currency A
Explanation: When the quotation units align, multiply the two exchange rates so that Currency B cancels. 1.1666 B/A × 113.00 C/B
= 131.82 C/A. Dividing instead of multiplying would leave the unit conversion inconsistent with the requested quotation.
Question 3. A candidate preparing for New Zealand Financial Markets Association Accreditation encounters the
following description: “A client's willingness to accept investment risk and volatility.” Which term is most directly
associated with this description?
A. Product due diligence
B. Time horizon
C. Risk tolerance
D. Suitability assessment
Correct Answer: C. Risk tolerance
Explanation: Risk tolerance is best understood as a client's willingness to accept investment risk and volatility. This interpretation is
consistent with the way the concept is applied in professional securities and investment practice, including activity overseen by
applicable New Zealand regulators and NZFMA professional standards. The other choices describe different concepts or would
lead to a materially different risk, trading, valuation, or compliance conclusion.
Question 4. A bond has a face value of NZ$100.00, an annual coupon rate of 3.0%, and a market price of NZ$88.00.
What is its current yield?
A. 13.64%
B. 3.41%
C. 4.00%
D. 3.00%
Correct Answer: B. 3.41%
Explanation: Current yield equals annual coupon cash flow divided by current market price, so the numerator is NZ$3.00. Dividing
by NZ$88.00 gives 3.41%. Current yield is not the coupon rate and it is not yield to maturity because it ignores the timing and
amount of the redemption cash flow.
Page 1
,Question 5. Which of the following best describes Puttable bond?
A. A debt instrument whose coupon resets periodically by reference to a specified benchmark plus or minus a spread.
B. A bond that allows the investor to require early redemption under specified terms.
C. The discount rate that equates a bond's promised cash flows to its current price, assuming modeled cash flows and holding to
maturity.
D. A measure of a fixed-income instrument's sensitivity to changes in yield, subject to the assumptions of the duration measure
used.
Correct Answer: B. A bond that allows the investor to require early redemption under specified terms.
Explanation: Puttable bond is best understood as a bond that allows the investor to require early redemption under specified
terms. This interpretation is consistent with the way the concept is applied in professional securities and investment practice,
including activity overseen by applicable New Zealand regulators and NZFMA professional standards. The other choices describe
different concepts or would lead to a materially different risk, trading, valuation, or compliance conclusion.
Question 6. A trader takes a long futures position at 120.00. The contract multiplier is 50, and the position is closed
at 112.00. Ignoring fees and daily financing effects, what is the profit or loss per contract?
A. NZ$520.00
B. NZ$-400.00
C. NZ$400.00
D. NZ$-8.00
Correct Answer: B. NZ$-400.00
Explanation: Futures profit or loss equals the price change multiplied by the contract multiplier, with the sign determined by
whether the position is long or short. For this long position, the result is NZ$-400.00. The contract's quoted price change alone is not
the cash profit or loss because the multiplier converts the quotation into contract value.
Question 7. A company has current assets of 180 million and current liabilities of 40 million. What is its current
ratio?
A. 5.50
B. 140.00
C. 4.50
D. 0.22
Correct Answer: C. 4.50
Explanation: The current ratio equals current assets divided by current liabilities. = 4.50. Subtracting the two amounts
produces working capital, which is a different liquidity measure.
Question 8. Which of the following best describes Preferred share?
A. An equity or hybrid security that generally has priority over common shares for specified dividends or liquidation claims.
B. An increase in shares outstanding with a proportional reduction in price per share, absent other market effects.
C. Market price per share divided by earnings per share.
D. A distribution by a company to shareholders according to the type and terms of the security.
Correct Answer: A. An equity or hybrid security that generally has priority over common shares for specified dividends
or liquidation claims.
Explanation: Preferred share is best understood as an equity or hybrid security that generally has priority over common shares for
specified dividends or liquidation claims. This interpretation is consistent with the way the concept is applied in professional
securities and investment practice, including activity overseen by applicable New Zealand regulators and NZFMA professional
standards. The other choices describe different concepts or would lead to a materially different risk, trading, valuation, or
compliance conclusion.
Page 2
,Question 9. A pooled fund reports assets of NZ$150,000,000.00, liabilities of NZ$8,000,000.00, and 5 million units
outstanding. What is the fund's NAV per unit?
A. NZ$30.00
B. NZ$28.40
C. NZ$1.60
D. NZ$31.60
Correct Answer: B. NZ$28.40
Explanation: Net asset value equals assets minus liabilities, divided by units outstanding. Here the net assets are
NZ$142,000,000.00, which produces an NAV per unit of NZ$28.40. Using gross assets would overstate value because fund
liabilities belong in the NAV calculation.
Question 10. An investor buys a security for NZ$180.00, receives NZ$2.00 in cash distributions, and later sells it
for NZ$160.00. What is the holding-period return?
A. -15.00%
B. -5.00%
C. -11.11%
D. -10.00%
Correct Answer: D. -10.00%
Explanation: Holding-period return equals price change plus cash income, divided by the initial price: (160 - 180 + 2) / 180. That
calculation gives -10.00%, assuming no taxes, fees, or other cash flows. Using only the price change would omit the distribution and
therefore would not measure the complete holding-period return.
Question 11. A one-period project requires an initial outlay of NZ$150,000.00 and is expected to pay NZ$110,000.00
one year later. At a discount rate of 5.0%, what is the NPV?
A. NZ$-34,500.00
B. NZ$-40,000.00
C. NZ$-45,238.10
D. NZ$45,238.10
Correct Answer: C. NZ$-45,238.10
Explanation: NPV equals the present value of future cash flows minus the initial outlay. Discounting NZ$110,000.00 for one year at
5.0% and subtracting NZ$150,000.00 gives NZ$-45,238.10. The undiscounted difference ignores the time value of money and
therefore is not NPV.
Question 12. An investor buys a put with strike NZ$125.00 for a premium of NZ$2.00 per unit. Ignoring transaction
costs, what is the breakeven underlying price at expiration?
A. NZ$127.00
B. NZ$125.00
C. NZ$2.00
D. NZ$123.00
Correct Answer: D. NZ$123.00
Explanation: A long put breaks even at expiration when the put's intrinsic value equals the premium paid. The breakeven is strike
minus premium, or NZ$125.00 - NZ$2.00 = NZ$123.00. A lower underlying price increases the long put's expiration profit after the
breakeven is crossed.
Page 3
, Question 13. The best bid for a security is NZ$178.65 and the best ask is NZ$179.65. What is the quoted bid-ask
spread in price units?
A. NZ$358.30
B. NZ$179.15
C. NZ$1.00
D. 0.56%
Correct Answer: C. NZ$1.00
Explanation: The quoted spread in price units equals ask minus bid. NZ$179.65 - NZ$178.65 = NZ$1.00. A percentage spread
would require an additional denominator such as the midpoint, but the question asks only for price units.
Question 14. Which of the following best describes Interest-rate swap?
A. A swap involving cash flows denominated in different currencies, often including principal exchanges under the contract terms.
B. A position intended to offset or reduce a specified financial risk in another exposure.
C. A privately negotiated agreement to transact in an underlying asset at a future date at a price agreed today.
D. A contract in which counterparties exchange interest-payment streams according to specified terms, commonly fixed versus
floating.
Correct Answer: D. A contract in which counterparties exchange interest-payment streams according to specified terms,
commonly fixed versus floating.
Explanation: Interest-rate swap is best understood as a contract in which counterparties exchange interest-payment streams
according to specified terms, commonly fixed versus floating. This interpretation is consistent with the way the concept is applied in
professional securities and investment practice, including activity overseen by applicable New Zealand regulators and NZFMA
professional standards. The other choices describe different concepts or would lead to a materially different risk, trading, valuation,
or compliance conclusion.
Question 15. A company reports net income of NZ$60,000,000.00, preferred dividends of NZ$1,000,000.00, and 15
million weighted-average common shares. What is basic EPS using these figures?
A. NZ$3.93
B. NZ$4.00
C. NZ$4.07
D. NZ$0.25
Correct Answer: A. NZ$3.93
Explanation: Basic EPS allocates earnings available to common shareholders across the weighted-average common shares
outstanding. Subtracting preferred dividends leaves NZ$59,000,000.00, and dividing by 15 million shares gives NZ$3.93. Using
total net income without the preferred-dividend adjustment would overstate earnings attributable to common shares.
Question 16. Currency A is quoted at 1.2152 units of Currency B per A, and Currency B is quoted at 153.57 units of
Currency C per B. What is the implied Currency C per Currency A cross rate?
A. 154.79 units of Currency C per Currency A
B. 0.0079 units of Currency C per Currency A
C. 186.62 units of Currency C per Currency A
D. 126.38 units of Currency C per Currency A
Correct Answer: C. 186.62 units of Currency C per Currency A
Explanation: When the quotation units align, multiply the two exchange rates so that Currency B cancels. 1.2152 B/A × 153.57 C/B
= 186.62 C/A. Dividing instead of multiplying would leave the unit conversion inconsistent with the requested quotation.
Page 4
Question 1. A fund earns a gross return of 6.00% for a year and incurs annual expenses equal to 1.00% of assets,
with no other adjustments. What is the approximate net return?
A. Approximately 6.00%
B. Approximately 7.00%
C. Approximately 5.00%
D. Approximately 1.00%
Correct Answer: C. Approximately 5.00%
Explanation: Under the simplified assumptions, expenses reduce the gross return approximately one-for-one. 6.00% - 1.00% =
approximately 5.00%. Actual reported performance can differ because of timing, compounding, transaction costs, taxes, and the
precise method used to accrue expenses.
Question 2. Currency A is quoted at 1.1666 units of Currency B per A, and Currency B is quoted at 113.00 units of
Currency C per B. What is the implied Currency C per Currency A cross rate?
A. 96.87 units of Currency C per Currency A
B. 0.0103 units of Currency C per Currency A
C. 131.82 units of Currency C per Currency A
D. 114.17 units of Currency C per Currency A
Correct Answer: C. 131.82 units of Currency C per Currency A
Explanation: When the quotation units align, multiply the two exchange rates so that Currency B cancels. 1.1666 B/A × 113.00 C/B
= 131.82 C/A. Dividing instead of multiplying would leave the unit conversion inconsistent with the requested quotation.
Question 3. A candidate preparing for New Zealand Financial Markets Association Accreditation encounters the
following description: “A client's willingness to accept investment risk and volatility.” Which term is most directly
associated with this description?
A. Product due diligence
B. Time horizon
C. Risk tolerance
D. Suitability assessment
Correct Answer: C. Risk tolerance
Explanation: Risk tolerance is best understood as a client's willingness to accept investment risk and volatility. This interpretation is
consistent with the way the concept is applied in professional securities and investment practice, including activity overseen by
applicable New Zealand regulators and NZFMA professional standards. The other choices describe different concepts or would
lead to a materially different risk, trading, valuation, or compliance conclusion.
Question 4. A bond has a face value of NZ$100.00, an annual coupon rate of 3.0%, and a market price of NZ$88.00.
What is its current yield?
A. 13.64%
B. 3.41%
C. 4.00%
D. 3.00%
Correct Answer: B. 3.41%
Explanation: Current yield equals annual coupon cash flow divided by current market price, so the numerator is NZ$3.00. Dividing
by NZ$88.00 gives 3.41%. Current yield is not the coupon rate and it is not yield to maturity because it ignores the timing and
amount of the redemption cash flow.
Page 1
,Question 5. Which of the following best describes Puttable bond?
A. A debt instrument whose coupon resets periodically by reference to a specified benchmark plus or minus a spread.
B. A bond that allows the investor to require early redemption under specified terms.
C. The discount rate that equates a bond's promised cash flows to its current price, assuming modeled cash flows and holding to
maturity.
D. A measure of a fixed-income instrument's sensitivity to changes in yield, subject to the assumptions of the duration measure
used.
Correct Answer: B. A bond that allows the investor to require early redemption under specified terms.
Explanation: Puttable bond is best understood as a bond that allows the investor to require early redemption under specified
terms. This interpretation is consistent with the way the concept is applied in professional securities and investment practice,
including activity overseen by applicable New Zealand regulators and NZFMA professional standards. The other choices describe
different concepts or would lead to a materially different risk, trading, valuation, or compliance conclusion.
Question 6. A trader takes a long futures position at 120.00. The contract multiplier is 50, and the position is closed
at 112.00. Ignoring fees and daily financing effects, what is the profit or loss per contract?
A. NZ$520.00
B. NZ$-400.00
C. NZ$400.00
D. NZ$-8.00
Correct Answer: B. NZ$-400.00
Explanation: Futures profit or loss equals the price change multiplied by the contract multiplier, with the sign determined by
whether the position is long or short. For this long position, the result is NZ$-400.00. The contract's quoted price change alone is not
the cash profit or loss because the multiplier converts the quotation into contract value.
Question 7. A company has current assets of 180 million and current liabilities of 40 million. What is its current
ratio?
A. 5.50
B. 140.00
C. 4.50
D. 0.22
Correct Answer: C. 4.50
Explanation: The current ratio equals current assets divided by current liabilities. = 4.50. Subtracting the two amounts
produces working capital, which is a different liquidity measure.
Question 8. Which of the following best describes Preferred share?
A. An equity or hybrid security that generally has priority over common shares for specified dividends or liquidation claims.
B. An increase in shares outstanding with a proportional reduction in price per share, absent other market effects.
C. Market price per share divided by earnings per share.
D. A distribution by a company to shareholders according to the type and terms of the security.
Correct Answer: A. An equity or hybrid security that generally has priority over common shares for specified dividends
or liquidation claims.
Explanation: Preferred share is best understood as an equity or hybrid security that generally has priority over common shares for
specified dividends or liquidation claims. This interpretation is consistent with the way the concept is applied in professional
securities and investment practice, including activity overseen by applicable New Zealand regulators and NZFMA professional
standards. The other choices describe different concepts or would lead to a materially different risk, trading, valuation, or
compliance conclusion.
Page 2
,Question 9. A pooled fund reports assets of NZ$150,000,000.00, liabilities of NZ$8,000,000.00, and 5 million units
outstanding. What is the fund's NAV per unit?
A. NZ$30.00
B. NZ$28.40
C. NZ$1.60
D. NZ$31.60
Correct Answer: B. NZ$28.40
Explanation: Net asset value equals assets minus liabilities, divided by units outstanding. Here the net assets are
NZ$142,000,000.00, which produces an NAV per unit of NZ$28.40. Using gross assets would overstate value because fund
liabilities belong in the NAV calculation.
Question 10. An investor buys a security for NZ$180.00, receives NZ$2.00 in cash distributions, and later sells it
for NZ$160.00. What is the holding-period return?
A. -15.00%
B. -5.00%
C. -11.11%
D. -10.00%
Correct Answer: D. -10.00%
Explanation: Holding-period return equals price change plus cash income, divided by the initial price: (160 - 180 + 2) / 180. That
calculation gives -10.00%, assuming no taxes, fees, or other cash flows. Using only the price change would omit the distribution and
therefore would not measure the complete holding-period return.
Question 11. A one-period project requires an initial outlay of NZ$150,000.00 and is expected to pay NZ$110,000.00
one year later. At a discount rate of 5.0%, what is the NPV?
A. NZ$-34,500.00
B. NZ$-40,000.00
C. NZ$-45,238.10
D. NZ$45,238.10
Correct Answer: C. NZ$-45,238.10
Explanation: NPV equals the present value of future cash flows minus the initial outlay. Discounting NZ$110,000.00 for one year at
5.0% and subtracting NZ$150,000.00 gives NZ$-45,238.10. The undiscounted difference ignores the time value of money and
therefore is not NPV.
Question 12. An investor buys a put with strike NZ$125.00 for a premium of NZ$2.00 per unit. Ignoring transaction
costs, what is the breakeven underlying price at expiration?
A. NZ$127.00
B. NZ$125.00
C. NZ$2.00
D. NZ$123.00
Correct Answer: D. NZ$123.00
Explanation: A long put breaks even at expiration when the put's intrinsic value equals the premium paid. The breakeven is strike
minus premium, or NZ$125.00 - NZ$2.00 = NZ$123.00. A lower underlying price increases the long put's expiration profit after the
breakeven is crossed.
Page 3
, Question 13. The best bid for a security is NZ$178.65 and the best ask is NZ$179.65. What is the quoted bid-ask
spread in price units?
A. NZ$358.30
B. NZ$179.15
C. NZ$1.00
D. 0.56%
Correct Answer: C. NZ$1.00
Explanation: The quoted spread in price units equals ask minus bid. NZ$179.65 - NZ$178.65 = NZ$1.00. A percentage spread
would require an additional denominator such as the midpoint, but the question asks only for price units.
Question 14. Which of the following best describes Interest-rate swap?
A. A swap involving cash flows denominated in different currencies, often including principal exchanges under the contract terms.
B. A position intended to offset or reduce a specified financial risk in another exposure.
C. A privately negotiated agreement to transact in an underlying asset at a future date at a price agreed today.
D. A contract in which counterparties exchange interest-payment streams according to specified terms, commonly fixed versus
floating.
Correct Answer: D. A contract in which counterparties exchange interest-payment streams according to specified terms,
commonly fixed versus floating.
Explanation: Interest-rate swap is best understood as a contract in which counterparties exchange interest-payment streams
according to specified terms, commonly fixed versus floating. This interpretation is consistent with the way the concept is applied in
professional securities and investment practice, including activity overseen by applicable New Zealand regulators and NZFMA
professional standards. The other choices describe different concepts or would lead to a materially different risk, trading, valuation,
or compliance conclusion.
Question 15. A company reports net income of NZ$60,000,000.00, preferred dividends of NZ$1,000,000.00, and 15
million weighted-average common shares. What is basic EPS using these figures?
A. NZ$3.93
B. NZ$4.00
C. NZ$4.07
D. NZ$0.25
Correct Answer: A. NZ$3.93
Explanation: Basic EPS allocates earnings available to common shareholders across the weighted-average common shares
outstanding. Subtracting preferred dividends leaves NZ$59,000,000.00, and dividing by 15 million shares gives NZ$3.93. Using
total net income without the preferred-dividend adjustment would overstate earnings attributable to common shares.
Question 16. Currency A is quoted at 1.2152 units of Currency B per A, and Currency B is quoted at 153.57 units of
Currency C per B. What is the implied Currency C per Currency A cross rate?
A. 154.79 units of Currency C per Currency A
B. 0.0079 units of Currency C per Currency A
C. 186.62 units of Currency C per Currency A
D. 126.38 units of Currency C per Currency A
Correct Answer: C. 186.62 units of Currency C per Currency A
Explanation: When the quotation units align, multiply the two exchange rates so that Currency B cancels. 1.2152 B/A × 153.57 C/B
= 186.62 C/A. Dividing instead of multiplying would leave the unit conversion inconsistent with the requested quotation.
Page 4
