Maharashtra State BoardHSC Commerce 12th Board Exam
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Distinguish between the following.Money market and Capital market - Secretarial Practice

Distinguish Between

Distinguish between the following
Money market and Capital market

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Solution

  Money Market Capital Market
1) Meaning It is a component of the financial market where short-term borrowing and lending takes place. It is a component of the financial market where long-term borrowing and lending takes place.
2) Time Period In the money market, the instruments traded have a maturity period of one year or less than one year. In the capital market, the instruments traded have a maturity period of more than one year
3) Instruments Certificate of deposits, repurchase agreements, commercial paper, treasury bills, etc. are the instruments traded in the money market. Stocks, shares, debentures, bonds, securities of the government are the instruments of the capital market.
4) Purpose of borrowing Funds are borrowed to meet working capital requirements or for small investments. Long-term funds help to establish a new business, expand or diversify it, or purchase fixed assets.
5) Institutions Participants in the market are central banks, commercial banks, acceptance houses, non-bank financial institutions, bill brokers, etc. Stock exchanges, commercial banks, non-bank institutions, financial intermediaries, etc. are the participants in the market
6) Risk Risk factor is very less because the maturity period of the instruments is less than one year Risk is more as compared to the money market as instruments have a long maturity period
7) Return on investment Return on investment is less as the money market is highly liquid and safe. Return on investment is comparatively high as the capital market is riskier
8) Role in the economy This market increases liquidity of funds in the economy. This market helps in mobilisation of savings in the economy
Concept: Types of Financial Market
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APPEARS IN

Balbharati Secretarial Practice 12th Standard HSC Maharashtra State Board
Chapter 11 Financial Market
Exercise | Q 4.2 | Page 169
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