AIFB Certified Capital Markets CCMP Exam
**Question 1.** Which of the following best describes the primary function of a money market?
A) Long‑term capital formation
B) Short‑term borrowing and lending of funds
C) Trading of equity derivatives
D) Issuance of corporate bonds
Answer: B
Explanation: Money markets deal with short‑term instruments (typically ≤ 1 year) such as Treasury bills,
commercial paper, and repos, facilitating short‑term borrowing and lending.
**Question 2.** In a capital market, the primary market is distinguished from the secondary market
because:
A) It involves trading of already‑issued securities.
B) It provides a venue for price discovery.
C) It is where new securities are issued to investors for the first time.
D) It only trades government securities.
Answer: C
Explanation: The primary market is where issuers sell new securities directly to investors; the secondary
market deals with resale of existing securities.
**Question 3.** Which regulatory body in India is primarily responsible for protecting investor interests
in securities markets?
A) RBI
B) SEBI
C) IRDAI
D) PFRDA
Answer: B
, AIFB Certified Capital Markets CCMP Exam
Explanation: The Securities and Exchange Board of India (SEBI) oversees securities market regulation,
ensuring fair practices and investor protection.
**Question 4.** The Securities Contracts (Regulation) Act, 1956 primarily governs:
A) Banking licenses
B) Insurance contracts
C) Futures and options contracts on recognized exchanges
D) Mutual fund disclosures
Answer: C
Explanation: The Act provides the legal framework for derivatives trading, defining contracts, their
settlement, and the powers of the regulator.
**Question 5.** Which of the following is NOT a typical function of a stock exchange?
A) Providing a platform for price discovery
B) Acting as a custodian for investor assets
C) Facilitating the issuance of new shares
D) Monitoring compliance with listing standards
Answer: B
Explanation: Custodial services are generally performed by custodians or depositories, not the exchange
itself.
**Question 6.** Dematerialization of securities is primarily carried out by:
A) Stock exchanges
B) Depositories such as NSDL and CDSL
C) Clearing corporations
D) Investment banks
, AIFB Certified Capital Markets CCMP Exam
Answer: B
Explanation: Depositories convert physical certificates into electronic form, enabling seamless electronic
trading and settlement.
**Question 7.** The role of a clearing corporation includes all EXCEPT:
A) Novation of trades
B) Guaranteeing settlement
C) Maintaining shareholder registers
D) Managing margin requirements
Answer: C
Explanation: Maintaining shareholder registers is the function of registrars and transfer agents, not
clearing corporations.
**Question 8.** An investment bank’s underwriting activity is most closely associated with:
A) Market making in secondary markets
B) Providing advisory services for mergers
C) Guaranteeing the sale of a new issue of securities
D) Custody of client assets
Answer: C
Explanation: Underwriting involves the investment bank purchasing the new issue from the issuer and
reselling it to investors, assuming the risk of unsold shares.
**Question 9.** Know Your Customer (KYC) norms are primarily intended to:
A) Reduce transaction costs for brokers
B) Prevent insider trading
C) Verify client identity to combat money laundering
, AIFB Certified Capital Markets CCMP Exam
D) Ensure fair pricing of securities
Answer: C
Explanation: KYC procedures collect client identification information to detect and prevent money
laundering and terrorist financing.
**Question 10.** Which of the following best defines a “book building” process in an IPO?
A) Fixed pricing of shares before issuance
B) Allocation of shares based on a lottery system
C) Determining the price band through investor demand feedback
D) Issuing shares exclusively to institutional investors
Answer: C
Explanation: Book building involves soliciting bids within a price range to gauge demand, helping set the
final issue price.
**Question 11.** The Draft Red Herring Prospectus (DRHP) is submitted to:
A) Stock exchange for listing approval
B) SEBI for review before the IPO is launched
C) Investors for final subscription
D) Registrar for share allocation
Answer: B
Explanation: The DRHP is a preliminary document filed with SEBI containing essential information about
the issuer, used for regulatory review.
**Question 12.** In a rights issue, existing shareholders are offered:
A) New shares at a discount in proportion to their current holding
B) Cash dividends for each share held
**Question 1.** Which of the following best describes the primary function of a money market?
A) Long‑term capital formation
B) Short‑term borrowing and lending of funds
C) Trading of equity derivatives
D) Issuance of corporate bonds
Answer: B
Explanation: Money markets deal with short‑term instruments (typically ≤ 1 year) such as Treasury bills,
commercial paper, and repos, facilitating short‑term borrowing and lending.
**Question 2.** In a capital market, the primary market is distinguished from the secondary market
because:
A) It involves trading of already‑issued securities.
B) It provides a venue for price discovery.
C) It is where new securities are issued to investors for the first time.
D) It only trades government securities.
Answer: C
Explanation: The primary market is where issuers sell new securities directly to investors; the secondary
market deals with resale of existing securities.
**Question 3.** Which regulatory body in India is primarily responsible for protecting investor interests
in securities markets?
A) RBI
B) SEBI
C) IRDAI
D) PFRDA
Answer: B
, AIFB Certified Capital Markets CCMP Exam
Explanation: The Securities and Exchange Board of India (SEBI) oversees securities market regulation,
ensuring fair practices and investor protection.
**Question 4.** The Securities Contracts (Regulation) Act, 1956 primarily governs:
A) Banking licenses
B) Insurance contracts
C) Futures and options contracts on recognized exchanges
D) Mutual fund disclosures
Answer: C
Explanation: The Act provides the legal framework for derivatives trading, defining contracts, their
settlement, and the powers of the regulator.
**Question 5.** Which of the following is NOT a typical function of a stock exchange?
A) Providing a platform for price discovery
B) Acting as a custodian for investor assets
C) Facilitating the issuance of new shares
D) Monitoring compliance with listing standards
Answer: B
Explanation: Custodial services are generally performed by custodians or depositories, not the exchange
itself.
**Question 6.** Dematerialization of securities is primarily carried out by:
A) Stock exchanges
B) Depositories such as NSDL and CDSL
C) Clearing corporations
D) Investment banks
, AIFB Certified Capital Markets CCMP Exam
Answer: B
Explanation: Depositories convert physical certificates into electronic form, enabling seamless electronic
trading and settlement.
**Question 7.** The role of a clearing corporation includes all EXCEPT:
A) Novation of trades
B) Guaranteeing settlement
C) Maintaining shareholder registers
D) Managing margin requirements
Answer: C
Explanation: Maintaining shareholder registers is the function of registrars and transfer agents, not
clearing corporations.
**Question 8.** An investment bank’s underwriting activity is most closely associated with:
A) Market making in secondary markets
B) Providing advisory services for mergers
C) Guaranteeing the sale of a new issue of securities
D) Custody of client assets
Answer: C
Explanation: Underwriting involves the investment bank purchasing the new issue from the issuer and
reselling it to investors, assuming the risk of unsold shares.
**Question 9.** Know Your Customer (KYC) norms are primarily intended to:
A) Reduce transaction costs for brokers
B) Prevent insider trading
C) Verify client identity to combat money laundering
, AIFB Certified Capital Markets CCMP Exam
D) Ensure fair pricing of securities
Answer: C
Explanation: KYC procedures collect client identification information to detect and prevent money
laundering and terrorist financing.
**Question 10.** Which of the following best defines a “book building” process in an IPO?
A) Fixed pricing of shares before issuance
B) Allocation of shares based on a lottery system
C) Determining the price band through investor demand feedback
D) Issuing shares exclusively to institutional investors
Answer: C
Explanation: Book building involves soliciting bids within a price range to gauge demand, helping set the
final issue price.
**Question 11.** The Draft Red Herring Prospectus (DRHP) is submitted to:
A) Stock exchange for listing approval
B) SEBI for review before the IPO is launched
C) Investors for final subscription
D) Registrar for share allocation
Answer: B
Explanation: The DRHP is a preliminary document filed with SEBI containing essential information about
the issuer, used for regulatory review.
**Question 12.** In a rights issue, existing shareholders are offered:
A) New shares at a discount in proportion to their current holding
B) Cash dividends for each share held
