Question

"Money market instruments are more safe than capital market instruments". Comment.

Answer 1

In the money market, extremely liquid financial instruments are traded, i.e. monetary instruments of short-term nature are dealt. On the contrary, the capital market is for long-term securities. It is a market for those securities which have direct or indirect claims to capital. the instruments traded in the money market carry low risk, hence, they are safer investments, but capital market instruments carry high risk.

The liquidity is high in the money market, but in the case of the capital market, liquidity is comparatively less. Hence, "Money market instruments are safer than capital market instruments".