Question

Differentiate between 'Capital Market' and 'Money Market' on the basis of the following:
(i)Meaning
(ii)Liquidity
(iii)Safety
(iv)Expected Return
(v)Duration

Answer 1

Basis	Capital Market	Money Market
Safety	Securities involve a greater risk in terms of repayment of the principal amount.	Securities are less risky due to the shorter duration of the instruments.
Expected Return	The expected return are higher due to the possibility of capital gains in the long term and regular dividends or bonus.	The expected returns are lower due to the shorter duration of the instruments.
Meaning	The capital market refers to the market or the institutional facilities through which long-term funds are raised and invested.	The money market refers to the market where trading in short-term securities of maturity periods varying from one day to a maximum of one year takes place.
Liquidity	Capital market securities are liquid in nature as they are tradable on stock exchanges, but they are less liquid in comparison to money market securities.	The securities traded are highly liquid in nature. DFHI discounts money market securities and offers a ready market for them.
Duration	Securities traded are of medium term and long term wherein the maturity period is more than one year.	Securities traded are of short term only wherein the maturity period can vary from one day to a maximum of one year.