CBSE Class 12 Business Studies 2014 Outside Delhi Set 3 Paper

Question : 4 of 8

Marks: +1, -0

Differentiate between 'Capital Market' and 'Money Market' on the basis of the following:
(i) Participants
(ii) Instruments
(iii) Duration
(iv) Investment outlay
(v) Liquidity

Solution:

Basis for Difference	Capital Market	Money Market
Participants	Participants in this market include financial institutions, merchant bankers, stock exchanges, mutual funds, foreign investors and general public.	Participants in this market include RBI, commercial banks, principal dealers and brokers, and non-bank financial institution.
Instruments	Instruments traded consist of equity shares, preference shares, debentures, bonds and other longterm securities.	Instruments traded consist of treasury bills, commercial bills, certificates of deposits and other short-term securities.
Investment Outlay	This market dealsin small value securities, i.e. securities of values $\₹ 10$ , $\₹ 100$ , etc.	This market deals in high value securities. For example, the minimum amount of call loan is $\₹ 10$ crores.
Duration	Securities traded are of medium term and long term wherein the maturity period is of more than one year.	Securities traded are only of short-term 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.

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