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Answer» 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. |
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