Distinguish between Capital Market and Money Market.
Answers
SOLUTION :
Difference between capital market and money market :
CAPITAL MARKET :
(i) Participants :
Participants in the capital market are public, Financial institutions, banks, corporate bodies, mutual funds for investors , etc.
(ii) Instruments traded :
Equity shares, preference shares , debentures and bonds are traded in capital market.
(iii) Investment outlay :
Value of units of securities are very low i.e ₹ 10 , ₹ 100 and so on, traded in the capital market.
(iv) Period of securities :
Medium and long term securities such as shares and debentures are traded in capital market.
(v) Risk (safety) :
Securities traded in capital market of risky nature.
(vi) Return :
The return on capital market is generally high.
(vii) Liquidity :
Capital market securities are of liquid nature as they are marketable on the stock exchange.
MONEY MARKET :
(i) Participants :
Participants in money market are RBI, Banks, Financial Institutions, Finance companies, insurance companies and Mutual Funds.
(ii) Instruments traded :
Call money, treasury bills, commercial papers, Trade bills, certificates of deposit are traded in money market.
(iii) Investment outlay :
Value of securities traded in money market and quite expensive.
(iv) Period of securities :
Short term instrument of maximum tenure of 1 year are traded in money market.
(v) Risk (safety) :
Securities are traded in money market are of very low risk.
(vi) Return :
Investors get less return in money market.
(vii) Liquidity :
Securities traded in the money market are of very high liquidity.
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