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Question : 9
Total: 11
Distinguish between 'Capital Market' and 'Money Market' on the basis of following:
(i) Duration
(ii) Liquidity
(iii) Safety
(iv) Investment Outlay
(i) Duration
(ii) Liquidity
(iii) Safety
(iv) Investment Outlay
Solution:
Differences between Capital Market and Money Market.
| Basis | Capital Market | Money Market |
|---|---|---|
| (i) Duration | Deals in medium and long term securities. | Deals in short term funds having a maturity period upto one year or may be even a single day. |
| (ii) Liquidity | Securities are considered as liquid investment as they are marketable on stock exchange. | Money markets instruments are highly liquid as it is traded on The Discount Finance House of India. |
| (iii) Safety | Capital Market Instruments are riskier with respect to return and principle repayment. | Money market instruments are generally much safer with a minimum risk of default. |
| (iv) Investment Outlay | Does not require a huge financial outlay. | Entails huge sum of money as the instruments are quite expensive. |
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