Question

Distinguish between capital market and money market on the basis of :
(i) Participants
(ii) Instruments of trade/investment outlay
(iii) Duration of securities traded
(iv) Expected return
(v) Safety

Answer 1

$\begin{array}{ccc}\text{Basis}& \text{Capital Market}& \text{Money Market}\\ \text{Participants}& \text{Financial institutions, banks}& \text{RBI, large corporations, governments,}\\ & \text{corporations, foreign investors,}& \text{commercial banks, etc. are the participants}\\ & \text{etc. are the participants of capital market}& \text{of money market.}\\ \text{Instruments of}& \text{Equities, notes, bonds, deben-}& \text{T-bills, Call money, Commercial Bills,}\\ \text{trade/invest-}& \text{tures, mutual funds, etc. are the}& \text{Commercial Papers, Certificates of}\\ \text{ment outlay}& \text{instruments of capital market.}& \text{Deposits, etc. are the instruments}\\ & & \text{of money market.}.\\ \text{Duration}& \text{Used for long-term basis for}& \text{Used for short-term basis for assets}\\ \text{of securities}& \text{assets with maturity greater}& \text{with maturity up to one year.}\\ \text{traded.}& \text{than a year.}& \\ \text{Expected return}& \text{Returns vary with changes in}& \text{Returns are fixed and available}\\ & \text{prices and are available immedi}& \text{after maturity period}.\\ & \text{ately following sale of securities.}& \\ \text{Safety}& \text{Capital market is subject to risk}& \text{RBI regulates the money market so}\\ & \text{and volatility.}& \text{it is considered to be safe.}\end{array}$