Question

Differentiate between 'Money Market' and 'Capital Market' on any three bases.

Answer 1

Difference between 'Money Market' and 'Capital Market': \begin{tabular}{|p{4cm}|p{5cm}|p{5cm}|} \hline Basis & Money Market & Capital Market
\hline Participants & Institutional participants such as RBI, banks, financial institutions & Financial institutions, banks, corporate entities, foreign investors, retail investors
\hline Instruments & Short-term debt instruments like T-bills, trade bills, commercial paper, CDs & Long-term instruments like equity shares, debentures, bonds, preference shares
\hline Investment outlay & Requires large sums of money, as instruments are expensive & Doesn't necessarily require huge investment, accessible to small investors
\hline Duration & Deals with instruments with a maximum tenure of one year & Deals with medium and long-term securities
\hline \end{tabular} \newpage \begin{tabular}{|p{4cm}|p{5cm}|p{5cm}|} \hline Liquidity & Higher liquidity due to short-term nature & Liquid, but may not always be actively traded
\hline Safety & Safer with lower risk of default & Riskier with respect to returns and principal repayment
\hline Expected return & Relatively lower returns & Higher returns for investors
\hline \end{tabular