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Financial Markets
Distinguish between money market and capital market on the basis of:
(a) Participants
(b) Instruments
(c) Safety and
(d) Expected return
Distinction between Capital Market and Money Market:
| Basis | Capital Market | Money Market |
| Participants |
The participants in the capital market are financial institutions, banks, corporate entities, foreign investors and ordinary retail investors from public. |
Participation in the money market are institutional participants such as the RBI, banks, financial institutions etc. |
| Instruments | The main instruments traded in the capital market are – equity shares, debentures, bonds, preference shares etc. | The main instruments traded in the money market are short-term debt instruments such as T-bills, trade bills reports, commercial paper and certificates of deposit. |
| Safety | Capital market instruments are riskier both with respect to returns and principal repayment. | The money market is generally much safer with a minimum risk of default. This is due to the shorter duration of investing and also to financial soundness of the issuers. |
| Expected return | The investment in capital markets generally yield a higher return for investors than the money markets. The possibility of earnings is higher if the securities are held for a longer duration. | The investment in money market generally yield lesser return for investors than capital market. |
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What is Money Market?
Give two examples of Floatation Costs.
Name any two buyers of Commercial Papers.
What is meant by ‘Near Money’?
Name the one sub-market of money market.
What type of trade-off function is performed by the money market?
What is ‘Zero Coupon Bond’?
Explain the meaning of ‘Capital Market’, ‘Primary Market’ and ‘Secondary Market’.
Explain the meaning of ‘Primary Market’ and ‘Secondary Market’ as components of Capital Market.
What are the methods of floatation in Primary Market?
Or
State any five methods of floating new issue in the Primary Market?
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