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What is the difference between money market instruments and capital market instruments?

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What is the difference between money market instruments and capital market instruments?
posted Jul 10, 2017 by Deepak Jangid

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1 Answer

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Difference between Money Market and Capital Market is concerned:

  1. The place where short-term marketable securities are traded is known as Money Market. Unlike Capital Market, where long-term securities are created and traded is known as Capital Market.
  2. Capital Market is well organised which Money Market lacks.
    The instruments traded in money market carry low risk, hence, they are safer investments, but capital market instruments carry high risk.
  3. The liquidity is high in the money market, but in the case of the capital market, liquidity is comparatively less.
  4. The major institutions that work in money market are the central bank, commercial bank, non-financial institutions and acceptance houses. On the contrary, the major institutions which operate in the money market are stock exchange, commercial bank, non-banking institutions etc.
  5. Money market fulfills short term credit requirements of the companies such as providing working capital to them. As against this, the capital market tends to fulfill long term credit requirements of the companies, like providing fixed capital to purchase land, building or machinery.
  6. Capital Market Instruments give higher returns as compared to money market instruments.
  7. Redemption of Money Market instruments is done within a year, but Capital Market instruments have a life of more than a year as well as some of them are perpetual in nature.
answer Jul 11, 2017 by Shubham Rajput
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