NZX Adviser Accreditation New Zealand Exam Questions and Answers
Question 1. An investment earns a nominal return of 6.0% while inflation is 2.5%. Using the exact Fisher
relationship, what is the real return?
A. 8.50%
B. 41.67%
C. 3.41%
D. 3.50%
Correct Answer: C. 3.41%
Explanation: The exact real return is (1 + nominal return) / (1 + inflation) - 1. Using the stated values gives 3.41%. Simply
subtracting inflation from nominal return is a useful approximation at low rates, but it is not the exact calculation requested.
Question 2. An investor buys a put with strike NZ$125.00 for a premium of NZ$7.00 per unit. Ignoring transaction
costs, what is the breakeven underlying price at expiration?
A. NZ$125.00
B. NZ$118.00
C. NZ$7.00
D. NZ$132.00
Correct Answer: B. NZ$118.00
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$7.00 = NZ$118.00. A lower underlying price increases the long put's expiration profit after the
breakeven is crossed.
Question 3. A currency pair is quoted at 1.4455 spot and 1.4671 for the relevant forward date, in identical quotation
terms. Which statement is correct?
A. The forward relationship cannot be assessed from the two quoted rates.
B. The base currency trades at a forward discount of approximately 1.50% for the quoted period.
C. The base currency trades at a forward premium of approximately 1.50% for the quoted period.
D. The spot and forward rates imply no forward premium or discount.
Correct Answer: C. The base currency trades at a forward premium of approximately 1.50% for the quoted period.
Explanation: Compare the forward rate with spot using the same quotation convention. The proportional difference is (1.4671 /
1.4455 - 1) × 100 = 1.50%, so the direction follows whether forward is above or below spot. This percentage describes the
quoted-period forward premium or discount and is not automatically an annualized measure.
Question 4. An investor buys a call with strike NZ$100.00 for a premium of NZ$3.00 per unit. Ignoring transaction
costs, what is the breakeven underlying price at expiration?
A. NZ$103.00
B. NZ$100.00
C. NZ$3.00
D. NZ$97.00
Correct Answer: A. NZ$103.00
Explanation: A long call breaks even at expiration when intrinsic value exactly offsets the premium paid. Therefore the breakeven
is strike plus premium, or NZ$100.00 + NZ$3.00 = NZ$103.00. Below this level the position has a net loss at expiration, while above
it the position has a net profit.
Page 1
,Question 5. A portfolio returned 6.0%, the risk-free rate was 3.0%, and portfolio volatility was 8.0%. What was the
Sharpe ratio?
A. 2.67
B. 0.38
C. 3.00
D. 0.75
Correct Answer: B. 0.38
Explanation: The Sharpe ratio is excess return over the risk-free rate divided by return volatility. Using the figures given, (6.0% -
3.0%) / 8.0% = 0.38. It is a unitless risk-adjusted performance measure, so the volatility belongs in the denominator.
Question 6. A currency pair is quoted at 1.4555 spot and 1.4773 for the relevant forward date, in identical quotation
terms. Which statement is correct?
A. The forward relationship cannot be assessed from the two quoted rates.
B. The base currency trades at a forward discount of approximately 1.50% for the quoted period.
C. The spot and forward rates imply no forward premium or discount.
D. The base currency trades at a forward premium of approximately 1.50% for the quoted period.
Correct Answer: D. The base currency trades at a forward premium of approximately 1.50% for the quoted period.
Explanation: Compare the forward rate with spot using the same quotation convention. The proportional difference is (1.4773 /
1.4555 - 1) × 100 = 1.50%, so the direction follows whether forward is above or below spot. This percentage describes the
quoted-period forward premium or discount and is not automatically an annualized measure.
Question 7. A portfolio returned 12.0%, the risk-free rate was 1.0%, and portfolio volatility was 5.0%. What was the
Sharpe ratio?
A. 2.20
B. 2.40
C. 0.45
D. 11.00
Correct Answer: A. 2.20
Explanation: The Sharpe ratio is excess return over the risk-free rate divided by return volatility. Using the figures given, (12.0% -
1.0%) / 5.0% = 2.20. It is a unitless risk-adjusted performance measure, so the volatility belongs in the denominator.
Question 8. Which of the following best describes Basis risk?
A. A privately negotiated agreement to transact in an underlying asset at a future date at a price agreed today.
B. A standardized exchange-traded agreement to buy or sell an underlying asset at a future date under specified contract terms.
C. The amount by which an option is in the money, floored at zero.
D. The risk that the hedging instrument and the exposure being hedged do not move in sufficiently close alignment.
Correct Answer: D. The risk that the hedging instrument and the exposure being hedged do not move in sufficiently
close alignment.
Explanation: Basis risk is best understood as the risk that the hedging instrument and the exposure being hedged do not move in
sufficiently close alignment. This interpretation is consistent with the way the concept is applied in professional securities and
investment practice, including activity overseen by NZX Regulation and applicable New Zealand financial-markets law. The other
choices describe different concepts or would lead to a materially different risk, trading, valuation, or compliance conclusion.
Page 2
,Question 9. A 28-year-old client has a 2-year stated horizon and identifies the primary objective as moderate
growth. Before recommending a complex high-volatility product, what should the representative do first?
A. Recommend the product if its recent return exceeds the client's existing portfolio return.
B. Confirm the client's current objectives, financial circumstances, knowledge, risk tolerance and capacity, then assess whether
the product fits those facts.
C. Rely only on the client's age because age is the dominant suitability factor.
D. Recommend the product whenever it is legal to sell, regardless of the client's profile.
Correct Answer: B. Confirm the client's current objectives, financial circumstances, knowledge, risk tolerance and
capacity, then assess whether the product fits those facts.
Explanation: Suitability or analogous appropriateness standards require the recommendation process to start with a sufficiently
current understanding of the client and the product. Under a framework overseen by NZX Regulation and applicable New Zealand
financial-markets law, recent performance or legal availability alone does not establish that a product fits the client's circumstances.
A complex or volatile product generally requires particular attention to knowledge, loss capacity, time horizon, liquidity needs, and
relevant risk disclosures.
Question 10. An investor buys a security for NZ$55.00, receives NZ$3.00 in cash distributions, and later sells it for
NZ$45.00. What is the holding-period return?
A. -7.73%
B. -17.73%
C. -18.18%
D. -12.73%
Correct Answer: D. -12.73%
Explanation: Holding-period return equals price change plus cash income, divided by the initial price: (45 - 55 + 3) / 55. That
calculation gives -12.73%, 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. Which of the following best describes Feeder fund?
A. A pooled vehicle with a generally fixed number of shares that may trade in the secondary market at a premium or discount to
NAV.
B. A pooled vehicle that invests substantially in other investment funds rather than directly in the underlying securities.
C. A fund that invests substantially all or a major portion of its assets into a master fund or designated underlying fund.
D. The risk that significant investor withdrawals force a fund to raise cash under unfavorable market conditions.
Correct Answer: C. A fund that invests substantially all or a major portion of its assets into a master fund or designated
underlying fund.
Explanation: Feeder fund is best understood as a fund that invests substantially all or a major portion of its assets into a master
fund or designated underlying fund. This interpretation is consistent with the way the concept is applied in professional securities
and investment practice, including activity overseen by NZX Regulation and applicable New Zealand financial-markets law. The
other choices describe different concepts or would lead to a materially different risk, trading, valuation, or compliance conclusion.
Question 12. A firm finances itself with 40% debt and 60% equity. Pre-tax debt cost is 7.0%, equity cost is 13.0%,
and the tax rate is 20%. What is WACC assuming interest is tax-deductible?
A. 8.56%
B. 10.00%
C. 10.60%
D. 10.04%
Correct Answer: D. 10.04%
Explanation: WACC weights the after-tax debt cost and the equity cost by their capital weights. The calculation is 0.40 × 7.0% × (1
- 0.20) + 0.60 × 13.0% = 10.04%. Using the pre-tax debt cost without adjustment would overstate WACC under the assumption
given.
Page 3
, Question 13. A pooled fund reports assets of NZ$75,000,000.00, liabilities of NZ$3,000,000.00, and 12 million units
outstanding. What is the fund's NAV per unit?
A. NZ$6.25
B. NZ$6.50
C. NZ$6.00
D. NZ$0.25
Correct Answer: C. NZ$6.00
Explanation: Net asset value equals assets minus liabilities, divided by units outstanding. Here the net assets are
NZ$72,000,000.00, which produces an NAV per unit of NZ$6.00. Using gross assets would overstate value because fund liabilities
belong in the NAV calculation.
Question 14. A portfolio returned 10.0%, the risk-free rate was 2.0%, and portfolio volatility was 4.0%. What was the
Sharpe ratio?
A. 8.00
B. 2.00
C. 0.50
D. 2.50
Correct Answer: B. 2.00
Explanation: The Sharpe ratio is excess return over the risk-free rate divided by return volatility. Using the figures given, (10.0% -
2.0%) / 4.0% = 2.00. It is a unitless risk-adjusted performance measure, so the volatility belongs in the denominator.
Question 15. A firm finances itself with 30% debt and 70% equity. Pre-tax debt cost is 7.0%, equity cost is 12.0%,
and the tax rate is 20%. What is WACC assuming interest is tax-deductible?
A. 7.52%
B. 9.50%
C. 10.50%
D. 10.08%
Correct Answer: D. 10.08%
Explanation: WACC weights the after-tax debt cost and the equity cost by their capital weights. The calculation is 0.30 × 7.0% × (1
- 0.20) + 0.70 × 12.0% = 10.08%. Using the pre-tax debt cost without adjustment would overstate WACC under the assumption
given.
Question 16. A 58-year-old client has a 2-year stated horizon and identifies the primary objective as income with
limited volatility. Before recommending a complex high-volatility product, what should the representative do first?
A. Rely only on the client's age because age is the dominant suitability factor.
B. Confirm the client's current objectives, financial circumstances, knowledge, risk tolerance and capacity, then assess whether
the product fits those facts.
C. Recommend the product if its recent return exceeds the client's existing portfolio return.
D. Recommend the product whenever it is legal to sell, regardless of the client's profile.
Correct Answer: B. Confirm the client's current objectives, financial circumstances, knowledge, risk tolerance and
capacity, then assess whether the product fits those facts.
Explanation: Suitability or analogous appropriateness standards require the recommendation process to start with a sufficiently
current understanding of the client and the product. Under a framework overseen by NZX Regulation and applicable New Zealand
financial-markets law, recent performance or legal availability alone does not establish that a product fits the client's circumstances.
A complex or volatile product generally requires particular attention to knowledge, loss capacity, time horizon, liquidity needs, and
relevant risk disclosures.
Page 4
Question 1. An investment earns a nominal return of 6.0% while inflation is 2.5%. Using the exact Fisher
relationship, what is the real return?
A. 8.50%
B. 41.67%
C. 3.41%
D. 3.50%
Correct Answer: C. 3.41%
Explanation: The exact real return is (1 + nominal return) / (1 + inflation) - 1. Using the stated values gives 3.41%. Simply
subtracting inflation from nominal return is a useful approximation at low rates, but it is not the exact calculation requested.
Question 2. An investor buys a put with strike NZ$125.00 for a premium of NZ$7.00 per unit. Ignoring transaction
costs, what is the breakeven underlying price at expiration?
A. NZ$125.00
B. NZ$118.00
C. NZ$7.00
D. NZ$132.00
Correct Answer: B. NZ$118.00
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$7.00 = NZ$118.00. A lower underlying price increases the long put's expiration profit after the
breakeven is crossed.
Question 3. A currency pair is quoted at 1.4455 spot and 1.4671 for the relevant forward date, in identical quotation
terms. Which statement is correct?
A. The forward relationship cannot be assessed from the two quoted rates.
B. The base currency trades at a forward discount of approximately 1.50% for the quoted period.
C. The base currency trades at a forward premium of approximately 1.50% for the quoted period.
D. The spot and forward rates imply no forward premium or discount.
Correct Answer: C. The base currency trades at a forward premium of approximately 1.50% for the quoted period.
Explanation: Compare the forward rate with spot using the same quotation convention. The proportional difference is (1.4671 /
1.4455 - 1) × 100 = 1.50%, so the direction follows whether forward is above or below spot. This percentage describes the
quoted-period forward premium or discount and is not automatically an annualized measure.
Question 4. An investor buys a call with strike NZ$100.00 for a premium of NZ$3.00 per unit. Ignoring transaction
costs, what is the breakeven underlying price at expiration?
A. NZ$103.00
B. NZ$100.00
C. NZ$3.00
D. NZ$97.00
Correct Answer: A. NZ$103.00
Explanation: A long call breaks even at expiration when intrinsic value exactly offsets the premium paid. Therefore the breakeven
is strike plus premium, or NZ$100.00 + NZ$3.00 = NZ$103.00. Below this level the position has a net loss at expiration, while above
it the position has a net profit.
Page 1
,Question 5. A portfolio returned 6.0%, the risk-free rate was 3.0%, and portfolio volatility was 8.0%. What was the
Sharpe ratio?
A. 2.67
B. 0.38
C. 3.00
D. 0.75
Correct Answer: B. 0.38
Explanation: The Sharpe ratio is excess return over the risk-free rate divided by return volatility. Using the figures given, (6.0% -
3.0%) / 8.0% = 0.38. It is a unitless risk-adjusted performance measure, so the volatility belongs in the denominator.
Question 6. A currency pair is quoted at 1.4555 spot and 1.4773 for the relevant forward date, in identical quotation
terms. Which statement is correct?
A. The forward relationship cannot be assessed from the two quoted rates.
B. The base currency trades at a forward discount of approximately 1.50% for the quoted period.
C. The spot and forward rates imply no forward premium or discount.
D. The base currency trades at a forward premium of approximately 1.50% for the quoted period.
Correct Answer: D. The base currency trades at a forward premium of approximately 1.50% for the quoted period.
Explanation: Compare the forward rate with spot using the same quotation convention. The proportional difference is (1.4773 /
1.4555 - 1) × 100 = 1.50%, so the direction follows whether forward is above or below spot. This percentage describes the
quoted-period forward premium or discount and is not automatically an annualized measure.
Question 7. A portfolio returned 12.0%, the risk-free rate was 1.0%, and portfolio volatility was 5.0%. What was the
Sharpe ratio?
A. 2.20
B. 2.40
C. 0.45
D. 11.00
Correct Answer: A. 2.20
Explanation: The Sharpe ratio is excess return over the risk-free rate divided by return volatility. Using the figures given, (12.0% -
1.0%) / 5.0% = 2.20. It is a unitless risk-adjusted performance measure, so the volatility belongs in the denominator.
Question 8. Which of the following best describes Basis risk?
A. A privately negotiated agreement to transact in an underlying asset at a future date at a price agreed today.
B. A standardized exchange-traded agreement to buy or sell an underlying asset at a future date under specified contract terms.
C. The amount by which an option is in the money, floored at zero.
D. The risk that the hedging instrument and the exposure being hedged do not move in sufficiently close alignment.
Correct Answer: D. The risk that the hedging instrument and the exposure being hedged do not move in sufficiently
close alignment.
Explanation: Basis risk is best understood as the risk that the hedging instrument and the exposure being hedged do not move in
sufficiently close alignment. This interpretation is consistent with the way the concept is applied in professional securities and
investment practice, including activity overseen by NZX Regulation and applicable New Zealand financial-markets law. The other
choices describe different concepts or would lead to a materially different risk, trading, valuation, or compliance conclusion.
Page 2
,Question 9. A 28-year-old client has a 2-year stated horizon and identifies the primary objective as moderate
growth. Before recommending a complex high-volatility product, what should the representative do first?
A. Recommend the product if its recent return exceeds the client's existing portfolio return.
B. Confirm the client's current objectives, financial circumstances, knowledge, risk tolerance and capacity, then assess whether
the product fits those facts.
C. Rely only on the client's age because age is the dominant suitability factor.
D. Recommend the product whenever it is legal to sell, regardless of the client's profile.
Correct Answer: B. Confirm the client's current objectives, financial circumstances, knowledge, risk tolerance and
capacity, then assess whether the product fits those facts.
Explanation: Suitability or analogous appropriateness standards require the recommendation process to start with a sufficiently
current understanding of the client and the product. Under a framework overseen by NZX Regulation and applicable New Zealand
financial-markets law, recent performance or legal availability alone does not establish that a product fits the client's circumstances.
A complex or volatile product generally requires particular attention to knowledge, loss capacity, time horizon, liquidity needs, and
relevant risk disclosures.
Question 10. An investor buys a security for NZ$55.00, receives NZ$3.00 in cash distributions, and later sells it for
NZ$45.00. What is the holding-period return?
A. -7.73%
B. -17.73%
C. -18.18%
D. -12.73%
Correct Answer: D. -12.73%
Explanation: Holding-period return equals price change plus cash income, divided by the initial price: (45 - 55 + 3) / 55. That
calculation gives -12.73%, 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. Which of the following best describes Feeder fund?
A. A pooled vehicle with a generally fixed number of shares that may trade in the secondary market at a premium or discount to
NAV.
B. A pooled vehicle that invests substantially in other investment funds rather than directly in the underlying securities.
C. A fund that invests substantially all or a major portion of its assets into a master fund or designated underlying fund.
D. The risk that significant investor withdrawals force a fund to raise cash under unfavorable market conditions.
Correct Answer: C. A fund that invests substantially all or a major portion of its assets into a master fund or designated
underlying fund.
Explanation: Feeder fund is best understood as a fund that invests substantially all or a major portion of its assets into a master
fund or designated underlying fund. This interpretation is consistent with the way the concept is applied in professional securities
and investment practice, including activity overseen by NZX Regulation and applicable New Zealand financial-markets law. The
other choices describe different concepts or would lead to a materially different risk, trading, valuation, or compliance conclusion.
Question 12. A firm finances itself with 40% debt and 60% equity. Pre-tax debt cost is 7.0%, equity cost is 13.0%,
and the tax rate is 20%. What is WACC assuming interest is tax-deductible?
A. 8.56%
B. 10.00%
C. 10.60%
D. 10.04%
Correct Answer: D. 10.04%
Explanation: WACC weights the after-tax debt cost and the equity cost by their capital weights. The calculation is 0.40 × 7.0% × (1
- 0.20) + 0.60 × 13.0% = 10.04%. Using the pre-tax debt cost without adjustment would overstate WACC under the assumption
given.
Page 3
, Question 13. A pooled fund reports assets of NZ$75,000,000.00, liabilities of NZ$3,000,000.00, and 12 million units
outstanding. What is the fund's NAV per unit?
A. NZ$6.25
B. NZ$6.50
C. NZ$6.00
D. NZ$0.25
Correct Answer: C. NZ$6.00
Explanation: Net asset value equals assets minus liabilities, divided by units outstanding. Here the net assets are
NZ$72,000,000.00, which produces an NAV per unit of NZ$6.00. Using gross assets would overstate value because fund liabilities
belong in the NAV calculation.
Question 14. A portfolio returned 10.0%, the risk-free rate was 2.0%, and portfolio volatility was 4.0%. What was the
Sharpe ratio?
A. 8.00
B. 2.00
C. 0.50
D. 2.50
Correct Answer: B. 2.00
Explanation: The Sharpe ratio is excess return over the risk-free rate divided by return volatility. Using the figures given, (10.0% -
2.0%) / 4.0% = 2.00. It is a unitless risk-adjusted performance measure, so the volatility belongs in the denominator.
Question 15. A firm finances itself with 30% debt and 70% equity. Pre-tax debt cost is 7.0%, equity cost is 12.0%,
and the tax rate is 20%. What is WACC assuming interest is tax-deductible?
A. 7.52%
B. 9.50%
C. 10.50%
D. 10.08%
Correct Answer: D. 10.08%
Explanation: WACC weights the after-tax debt cost and the equity cost by their capital weights. The calculation is 0.30 × 7.0% × (1
- 0.20) + 0.70 × 12.0% = 10.08%. Using the pre-tax debt cost without adjustment would overstate WACC under the assumption
given.
Question 16. A 58-year-old client has a 2-year stated horizon and identifies the primary objective as income with
limited volatility. Before recommending a complex high-volatility product, what should the representative do first?
A. Rely only on the client's age because age is the dominant suitability factor.
B. Confirm the client's current objectives, financial circumstances, knowledge, risk tolerance and capacity, then assess whether
the product fits those facts.
C. Recommend the product if its recent return exceeds the client's existing portfolio return.
D. Recommend the product whenever it is legal to sell, regardless of the client's profile.
Correct Answer: B. Confirm the client's current objectives, financial circumstances, knowledge, risk tolerance and
capacity, then assess whether the product fits those facts.
Explanation: Suitability or analogous appropriateness standards require the recommendation process to start with a sufficiently
current understanding of the client and the product. Under a framework overseen by NZX Regulation and applicable New Zealand
financial-markets law, recent performance or legal availability alone does not establish that a product fits the client's circumstances.
A complex or volatile product generally requires particular attention to knowledge, loss capacity, time horizon, liquidity needs, and
relevant risk disclosures.
Page 4
