Question

A stock market is an important constituent of money market.

Hint:

Think about the duration: {Money} Market = Short-term money. {Capital} Market = Long-term capital (like stocks and bonds).

Answer 1

Step 1: Define the financial markets. The financial market is broadly divided into two segments: the money market and the capital market. Step 2: Differentiate between the two markets. The Money Market deals with short-term borrowing and lending (maturity up to one year). Instruments include treasury bills, commercial papers, etc. The Capital Market deals with long-term funds (maturity of more than one year). It includes the stock market (for shares/equity) and the bond market (for debt). Step 3: Place the stock market correctly. Since stocks represent long-term ownership capital with no maturity date, the stock market is a fundamental part of the capital market.