Distinguish between Capital Market and Money Market.
Distinguish between Capital Market and Money Market.
The following points highlight the difference between Capital Market and Money Market.
Basis of Difference
Capital Market
Money Market
Time Span of Securities
Capital Market mainly deals in the trading of medium and long-term securities wherein, the maturity period is more than one year.
Money Market deals in the trading of short-term securities wherein, the maturity period can vary from one day to a maximum of one year.
Liquidity
Capital market securities are liquid in nature as they are tradable on stock exchanges, but are less liquid in comparison to the money market securities.
The securities traded are highly liquid in nature. DFHI discounts money market securities and offers a ready market for them.
Returns Expected
Expected returns are higher due to the possibility of capital gains in long-term and regular dividends or bonus.
Expected returns are lower due to shorter duration.
Instruments
Instruments traded in capital market comprise of equity shares, preference shares, debentures, bonds and other long term securities.
Instruments traded in money market comprise of treasury bills, commercial bills, certificate of deposits and other short-term securities.
Risk
Capital market securities involve greater risk in terms of repayment of the principal amount.
Money market securities are less risky due to short time period and sound financial position of the issuers.
The following points highlight the difference between Capital Market and Money Market.
|
Basis of Difference |
Capital Market |
Money Market |
|
Time Span of Securities |
Capital Market mainly deals in the trading of medium and long-term securities wherein, the maturity period is more than one year. |
Money Market deals in the trading of short-term securities wherein, the maturity period can vary from one day to a maximum of one year. |
|
Liquidity |
Capital market securities are liquid in nature as they are tradable on stock exchanges, but are less liquid in comparison to the money market securities. |
The securities traded are highly liquid in nature. DFHI discounts money market securities and offers a ready market for them. |
|
Returns Expected |
Expected returns are higher due to the possibility of capital gains in long-term and regular dividends or bonus. |
Expected returns are lower due to shorter duration. |
|
Instruments |
Instruments traded in capital market comprise of equity shares, preference shares, debentures, bonds and other long term securities. |
Instruments traded in money market comprise of treasury bills, commercial bills, certificate of deposits and other short-term securities. |
|
Risk |
Capital market securities involve greater risk in terms of repayment of the principal amount. |
Money market securities are less risky due to short time period and sound financial position of the issuers. |
