Question
Money market and Capital Market.
Solution
Money Market | Captial 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 enterprise. |
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 tern 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 in this market are bonds, debentures, equity shares and stock. |
4 |
Functions Money market exists as a mechanism of liquidity adjustments i.e. a link between the depositors and borrowers. |
Capital market functions as a link between the 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 ris |
6 |
Institution The commercial banks are the important institutions in the money market |
The stock exchange is an important institution in the Capital Market. |
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APPEARS IN
Solution Distinguish Between Money Market and Capital Market Concept: Concept of Financial Markets.