AIFB Certified Stock Trading CSTP Exam
**Question 1.** Which entity primarily facilitates the matching of buy and sell orders for listed equities
in the United States?
A) Clearing Corporation
B) Depository
C) Stock Exchange
D) Brokerage Firm
Answer: C
Explanation: Stock exchanges such as NYSE and NASDAQ provide the platform where buy and sell orders
are matched.
**Question 2.** In India, which organization is responsible for the settlement of trades executed on the
NSE and BSE?
A) SEBI
B) National Securities Depository Limited (NSDL)
C) Central Depository Services (India) Limited (CDSL)
D) National Securities Clearing Corporation (NSCC)
Answer: D
Explanation: NSCC (or its Indian equivalent, the National Securities Clearing Corporation of the NSE)
clears and settles trades, ensuring delivery versus payment.
**Question 3.** Preferred shares differ from common shares mainly because they:
A) Have voting rights on all matters
B) Receive dividends before common shareholders
C) Participate in capital appreciation equally
D) Are always listed on secondary markets only
Answer: B
, AIFB Certified Stock Trading CSTP Exam
Explanation: Preferred equity typically carries a fixed dividend that is paid out before any dividends to
common shareholders.
**Question 4.** An ADR (American Depositary Receipt) enables U.S. investors to:
A) Trade foreign securities directly on foreign exchanges
B) Hold physical foreign shares in a U.S. bank vault
C) Trade foreign company shares on U.S. exchanges in dollars
D) Avoid all foreign tax withholding
Answer: C
Explanation: ADRs represent shares of foreign companies and are traded on U.S. exchanges
denominated in dollars.
**Question 5.** Which market participant is most likely to provide continuous two‑way quotes and
assume inventory risk?
A) Retail Investor
B) Institutional Investor
C) High‑Frequency Trader
D) Market Maker
Answer: D
Explanation: Market makers quote bid and ask prices continuously and hold inventory to facilitate
liquidity.
**Question 6.** The primary market is distinguished from the secondary market because:
A) It involves the resale of previously issued securities
B) It is where companies raise new capital through IPOs
C) It has no regulatory oversight
, AIFB Certified Stock Trading CSTP Exam
D) It only trades government bonds
Answer: B
Explanation: In the primary market, securities are issued for the first time, allowing issuers to raise fresh
capital.
**Question 7.** Which of the following is a key requirement for a company to list on the NASDAQ
Global Select Market?
A) Minimum market cap of $500 million
B) At least 1,000 shareholders of record
C) Positive cash flow from operations for three consecutive years
D) No requirement; any company can list upon request
Answer: A
Explanation: NASDAQ Global Select has stringent financial and liquidity thresholds, including a minimum
market capitalization.
**Question 8.** The insider‑trading prohibition under SEBI is primarily intended to:
A) Increase market volatility
B) Protect retail investors from unfair advantage
C) Promote high‑frequency trading
D) Reduce transaction costs for brokers
Answer: B
Explanation: Insider trading laws prevent individuals with material non‑public information from
exploiting that advantage, safeguarding market fairness.
**Question 9.** Which financial statement best shows a company’s cash inflows and outflows from
operating activities?
A) Balance Sheet
, AIFB Certified Stock Trading CSTP Exam
B) Income Statement
C) Statement of Cash Flows – Operating Section
D) Statement of Shareholders’ Equity
Answer: C
Explanation: The operating section of the cash flow statement details cash generated or used by core
business operations.
**Question 10.** The current ratio is calculated as:
A) Current Assets ÷ Current Liabilities
B) Total Assets ÷ Total Liabilities
C) Net Income ÷ Shareholders’ Equity
D) Cash ÷ Total Debt
Answer: A
Explanation: Current ratio measures short‑term liquidity by comparing assets that can be converted to
cash within a year to current obligations.
**Question 11.** A P/E ratio of 25 indicates that investors are:
A) Paying $25 for each dollar of earnings
B) Expecting a 25% dividend yield
C) Valuing the company at 25 times book value
D) Expecting earnings to grow 25% annually
Answer: A
Explanation: Price‑to‑Earnings ratio shows the price paid per unit of earnings; 25 means $25 per $1 of
earnings.
**Question 1.** Which entity primarily facilitates the matching of buy and sell orders for listed equities
in the United States?
A) Clearing Corporation
B) Depository
C) Stock Exchange
D) Brokerage Firm
Answer: C
Explanation: Stock exchanges such as NYSE and NASDAQ provide the platform where buy and sell orders
are matched.
**Question 2.** In India, which organization is responsible for the settlement of trades executed on the
NSE and BSE?
A) SEBI
B) National Securities Depository Limited (NSDL)
C) Central Depository Services (India) Limited (CDSL)
D) National Securities Clearing Corporation (NSCC)
Answer: D
Explanation: NSCC (or its Indian equivalent, the National Securities Clearing Corporation of the NSE)
clears and settles trades, ensuring delivery versus payment.
**Question 3.** Preferred shares differ from common shares mainly because they:
A) Have voting rights on all matters
B) Receive dividends before common shareholders
C) Participate in capital appreciation equally
D) Are always listed on secondary markets only
Answer: B
, AIFB Certified Stock Trading CSTP Exam
Explanation: Preferred equity typically carries a fixed dividend that is paid out before any dividends to
common shareholders.
**Question 4.** An ADR (American Depositary Receipt) enables U.S. investors to:
A) Trade foreign securities directly on foreign exchanges
B) Hold physical foreign shares in a U.S. bank vault
C) Trade foreign company shares on U.S. exchanges in dollars
D) Avoid all foreign tax withholding
Answer: C
Explanation: ADRs represent shares of foreign companies and are traded on U.S. exchanges
denominated in dollars.
**Question 5.** Which market participant is most likely to provide continuous two‑way quotes and
assume inventory risk?
A) Retail Investor
B) Institutional Investor
C) High‑Frequency Trader
D) Market Maker
Answer: D
Explanation: Market makers quote bid and ask prices continuously and hold inventory to facilitate
liquidity.
**Question 6.** The primary market is distinguished from the secondary market because:
A) It involves the resale of previously issued securities
B) It is where companies raise new capital through IPOs
C) It has no regulatory oversight
, AIFB Certified Stock Trading CSTP Exam
D) It only trades government bonds
Answer: B
Explanation: In the primary market, securities are issued for the first time, allowing issuers to raise fresh
capital.
**Question 7.** Which of the following is a key requirement for a company to list on the NASDAQ
Global Select Market?
A) Minimum market cap of $500 million
B) At least 1,000 shareholders of record
C) Positive cash flow from operations for three consecutive years
D) No requirement; any company can list upon request
Answer: A
Explanation: NASDAQ Global Select has stringent financial and liquidity thresholds, including a minimum
market capitalization.
**Question 8.** The insider‑trading prohibition under SEBI is primarily intended to:
A) Increase market volatility
B) Protect retail investors from unfair advantage
C) Promote high‑frequency trading
D) Reduce transaction costs for brokers
Answer: B
Explanation: Insider trading laws prevent individuals with material non‑public information from
exploiting that advantage, safeguarding market fairness.
**Question 9.** Which financial statement best shows a company’s cash inflows and outflows from
operating activities?
A) Balance Sheet
, AIFB Certified Stock Trading CSTP Exam
B) Income Statement
C) Statement of Cash Flows – Operating Section
D) Statement of Shareholders’ Equity
Answer: C
Explanation: The operating section of the cash flow statement details cash generated or used by core
business operations.
**Question 10.** The current ratio is calculated as:
A) Current Assets ÷ Current Liabilities
B) Total Assets ÷ Total Liabilities
C) Net Income ÷ Shareholders’ Equity
D) Cash ÷ Total Debt
Answer: A
Explanation: Current ratio measures short‑term liquidity by comparing assets that can be converted to
cash within a year to current obligations.
**Question 11.** A P/E ratio of 25 indicates that investors are:
A) Paying $25 for each dollar of earnings
B) Expecting a 25% dividend yield
C) Valuing the company at 25 times book value
D) Expecting earnings to grow 25% annually
Answer: A
Explanation: Price‑to‑Earnings ratio shows the price paid per unit of earnings; 25 means $25 per $1 of
earnings.
