Question

What are the differences among the major assets that trade in money markets and in capital markets?

Answer 1

1. Money market is a market where banks and financial institutions trade in short term instrument like trade credit, commercial paper, T bills, etc., whereas capital market is where instruments like stock, debentures and bonds are traded for a longer period of time.
2. The main difference between the money market’s asset and capital markets asset is that money market is used to trade asset for a period of 1 year or less whereas capital market is used for asset s traded for a longer period of time.
3. Money market is dealt by banks and financial institutions, whereas in capital market the dealing is done among individuals like stock brokers , underwriters and also institutions like banks.
4. The assets in money market are highly liquid whereas the assets in capital market are comparatively less liquid.
5. The risk in money market’s assets is low compared to capital markets’.
6. The asset in money market gives less return compared to assets in capital market.
7. The capital markets’ asset are classified under either primary or secondary market whereas there is no such classification for money markets assets.