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Distinguish Between Money Market and Capital Market - Secretarial Practice

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Money market and Capital Market.

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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.

 

Concept: Concept of Financial Markets
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