Question

What are the differences between EACH pair of financial markets?

• Primary markets versus Secondary Markets

• Money markets versus Capital markets

• Debt markets versus Equity markets

Answer 1

A

Basis	Primary market	Secondary market
Definition	Primary market is a platform where companies issue equity for the first time.	Secondary market is a platform for trading of securities already issued.
Products and types	Equity is issued in two nways namely, Initial public offer (IPO) and furthur public offer (FPO )	Trading is done by way of shares, warrants, derivatives ,etc
Parties involved	Transaction takes place betweeb company and investors	Buying and selling takes place between investors and investors
Price recognition	Company sells shares at a fixed price	Price is determined by demand and supply in the market
Objective	To raise capital for the company	Trading and liquidity for investors

B

Basis	Money market	Capital market
Definition	It is that part of financial market where tradind of short term securities takes place	It is that part of financial market where tradind of long term securities takes place
Institutions involved	Central bank, commercial banks, brokers,etc	commercial banks, stock exchange, insurance companies, etc.
Objective	To increase liquidity in the market	To ensure mpobilization of funds
Level of risk	Level of risk is low due to short time horizon	Level of risk is high due to long time horizon
Return on investment	Low due to short period	High due to long period

C

Basis	Debt market	Equity market
Type of investment	Investment is done in the form of shares being purchased .	Investment is done in the form of a loan being given.
Form of earnings	Earning is in the form of dividends recieved	Earning is in the form of periodic payments of interest
Risk factor	Higher risk involved	Lower risk involved
Volatility	Highly volatile due to changing prices.	Low volatility due to fixed interest payments
Return on investment	Higher returns	Lower returns