Question

Distinguish between the following. 

Money market and Capital market. 

Answer 1

	Money market	Capital market
1	Meaning A Market where short-term funds are borrowed and lend.	A market for borrowing and lending long-term capital required by business enterprises.
2	Term of Finance It provides short-term funds, in short-term instruments where the maturity is measured in days, weeks, or months.	It is a market for long-term instruments which is measured in years.
3	Instruments The instruments dealt in the market are bills of exchange, treasury bills, banker's acceptance, etc.	The instruments dealt with in this market are bonds, debentures, equity shares and stock.
4	Functions The money market exists as a mechanism of liquidity adjustments i.e. a link between the depositors and borrowers.	The capital market functions as a link between investors and entrepreneurs.
5	Risk The prices of these instruments do not fluctuate and they carry very low market risk.	The instruments are long-term and subject to market fluctuations and so they carry very high financial and market risk.
6	Institution The commercial banks are the important institutions in the money market.	The stock exchange is an important institution in the Capital Market.