© examsnet.com
Question : 4
Total: 4
State the difference between 'Capital Market' and 'Money Market' on any five basis.
Solution:
| Basis of Differences | Money Market | Capital Market |
|---|---|---|
| Time Span of Securities | It mainly deals in the trading of short-term securities and the maturity period is from one day to one year. | It deals in the trading of medium and long-term securities and the maturity period is more than one year. |
| Liquidity | The securities traded are highly liquid in nature because Discount and Finance House of India discounts money market securities and provides a ready market for them. | The securities traded are liquid in nature because they are tradable on stock exchanges. Though, they are less liquid in comparison to the money market securities. |
| Expected Returns | Expected returns are lower due to the short duration of time. | Expected returns are higher because of the possibility of capital gains, regular dividends and bonus in the long term. |
| Instruments | It includes certificate of deposits, commercial bills, treasury bills and other short-term securities. | It includes equity shares, bonds, debentures, preference shares and other long-term securities. |
| Risk Capital | Money market securities involves less risk due to the shorter duration and sound financial position of the issuers. | Capital market securities involve greater risk due to longer duration and also in terms of repayment of the principal amount. |
© examsnet.com
Go to Question: