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Question : 6
Total: 6
Differentiate between 'Capital Market' and 'Money Market' on the basis of following:
(i) Participants
(ii) Instruments
(iii) Expected Return
(iv) Safety
(v) Duration
(i) Participants
(ii) Instruments
(iii) Expected Return
(iv) Safety
(v) Duration
Solution:
| Basis | Capital Market | Money Market |
|---|---|---|
| Participants | Financial institutions, banks, corporations, foreign investors, etc. | RBI, large corporations |
| Instruments | Equities, notes, bonds, debentures, mutual funds, etc | T-bills, Call money, Commercial Bills, Commercial Paper, Certificate of Deposits, etc. |
| Expected Return | Returns vary with changes in prices and are available immediately following sale of transactions | Returns are fixed and available after maturity period |
| Safety | Subject to risk and volatility | RBI regulates the market and is considered to be safer than capital market |
| Duration | Used for long-term basis for assets with maturity greater than a year | Used for short-term basis for assets with maturity up to one year |
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