Question

Distinguish between
Money market and Capital market

Answer 1

Basis	Money market	Capital market
Meaning	A Market where short term funds are borrowed and lend.	A market for borrowing and lending long term capital required by business enterprise.
Terms of finance	It provides short term funds, in short term instruments where the maturity is measured in days, weeks, or months	It is a market for long term instrument which is measured in years.
Instrument	The instruments dealt in the market are bills of exchange, treasury bills, banker's acceptance, etc	The instruments dealt in this market are bonds, debentures, equity shares and stock.
Functions	Money market exists as a mechanism of liquidity adjustments i.e. a link between the depositors and borrowers.	Capital market functions as a link between the investors and entrepreneurs.
Risk	The prices of these instruments do not fluctuate and and they carry very low and market risk	The instruments are long term and subject to market fluctuations and so they carry very high financial and market risk
Institutions	The commercial banks are the important institutions in the money market	The stock exchange in an important institution in the Capital Market.